Revision of the ensemble computational market dynamics model with burgers’ type interaction for modelling extreme events in financial markets
Afolabi, Abdulazeez (2018)
Julkaisun pysyvä osoite on
There are features which make electricity spot prices an exception from other forms of commodities. These are, for instance, the non-storability of the commodity and unpredictability of its prices. These features attained by this commodity have made it an interesting subject for so many years. The major focus of most of the studies is to ﬁnd out how the commodity-related timeseries, like prices, consumption, etc. can be predicted. This research studies the New Zealand electricity spot price to see if there are possibilities for its prediction. The major challenge is the spikiness that occurs in the electricity spot prices. These rapid price swings that represent extreme volatility are a major hindrance in the forecasting of electricity spot market prices. Putting these sudden jumps into consideration, we propose a model which incorporates a type of Lévy process in modelling electricity spot market prices. This process, generalized hyperbolic distribution, was combined with the Capasso-Morale approach. The resulting model is in a form of a system of interrelated stochastic differential equations.