In this paper, the volatility of Italian electricity prices is explored making use of the available intra-daily information to provideempirical evidence on volatility persistence and effects of explanatory variables.We characterize the dynamics of electricity spot volatility in an ARMA-GARCH framework using intra-daily information, firstly the well known "realized volatility" and secondly the demanded volumes. Then we perform volatility forecasting on zonal basis to verify if these explanatory variables improve the forecasting performance. We show that the realized volatility explains well the conditional variance and reduces its persistence, henceinducing better volatility forecasts. We implement our analysis using hourly prices and volumes of the Italian electricity wholesale market, considering two zones in which the Italian market is split.
Realized volatility models for electricity markets
GROSSI, Luigi;GIANFREDA, Angelica;
2011-01-01
Abstract
In this paper, the volatility of Italian electricity prices is explored making use of the available intra-daily information to provideempirical evidence on volatility persistence and effects of explanatory variables.We characterize the dynamics of electricity spot volatility in an ARMA-GARCH framework using intra-daily information, firstly the well known "realized volatility" and secondly the demanded volumes. Then we perform volatility forecasting on zonal basis to verify if these explanatory variables improve the forecasting performance. We show that the realized volatility explains well the conditional variance and reduces its persistence, henceinducing better volatility forecasts. We implement our analysis using hourly prices and volumes of the Italian electricity wholesale market, considering two zones in which the Italian market is split.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.