Modelling spikes in electricity markets using excitable dynamics |
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Authors: | Angela De Sanctis |
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Affiliation: | Dipartimento di Metodi Quantitativi e Teoria Economica, Università “G. d’Annunzio” di Chieti-Pescara, Viale Pindaro, 42, 65127 Pescara, Italy |
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Abstract: | We present a general methodology to model spikes in deregulated electricity markets using excitable dynamics in a multi-regime switching approach. In particular, we propose a two-regime switching model and a three-regime switching model in which the spikes phenomenon is described by a FitzHugh-Nagumo excitable dynamics. Both models seems to be interesting candidates for describing the main characteristics of electricity price dynamics as the occurrence of stable periods in which prices fluctuate around some long-run mean, and turbulent periods in which prices experience jumps and spikes of very large magnitude. In agreement with market data, both models can produce probability distributions of price returns with positive skewness and very high values of kurtosis. |
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Keywords: | Excitable dynamics Electricity prices Regime-switches Spikes |
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