Last modified: 2018-05-16
Abstract
estimated through GARCH-type models can be strongly affected by the
presence of extreme observations. Although the presence
of spikes is a well-known stylized effect observed on electricity markets,
their presence has been often neglected and robust estimators have been rarely applied.
In this paper we try to fill this gap introducing a robust procedure to the study of the dynamics of
electricity prices. The conditional mean of de-trended and
seasonally adjusted prices is modeled though a robust estimator
of SETAR processes based on a polynomial weighting function (Grossi and Nan, 2015), while a robust GARCH is used for the conditional
variance. The robust GARCH estimator relies on the extension of the
forward search by Crosato and Grossi (2017). The robust SETAR-GARCH
model is applied to the Italian electricity markets using data in
the period spanning from 2013 to 2015. The purpose of this application is therefore twice:
first, it is possible to enhance the prediction from point to intervals with associated probability levels,
second, we set up a procedure to detect possible extreme prices which are commonly observed in electricity markets.
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