Estimating high quantiles for electricity prices by stable linear models

Christine Bernhardt, Claudia Klüppelberg, Thilo Meyer-Brandis

Abstract

ABSTRACT

We estimate conditional and unconditional high quantiles for daily electricity spot prices based on a linear model with stable innovations. This approach captures the impressive peaks in such data and, as a four-parametric family, captures also the asymmetry in the innovations. Moreover, it allows for explicit formulas of quantiles, which can then be calculated recursively from day to day. We also prove that conditional quantiles of step h ∈  ℕ converge for h → ∞ to the corresponding unconditional quantiles. This paper is motivated by the daily spot prices from the Singapore New Electricity Market, which serves as an example to show our method at work.