Abstract
We discuss theoretical properties and estimation of continuous-time ARMA (CARMA) processes, which are driven by a stable Lévy process. Such processes are very useful in a continuous-time linear stationary setup: they have a similar structure as the widely used ARMA models and provide all advantages of a continuous-time model. As an application we consider data from a deregulated electricity market. Here, we fit a CARMA(2,1) model to spot prices from the Singapore New Electricity Market. The quality of the estimates is assessed in a simulation study. The continuous-time modelling aims at a new pricing methodology for energy derivatives.
| Original language | English |
|---|---|
| Pages (from-to) | 447-470 |
| Number of pages | 24 |
| Journal | Statistical Modelling |
| Volume | 11 |
| Issue number | 5 |
| DOIs | |
| State | Published - Oct 2011 |
| Externally published | Yes |
Keywords
- CARMA model
- electricity prices
- estimation of CARMA models
- stable CARMA model
- stable Lévy process
- stable Ornstein-Uhlenbeck process
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