Seminario 15/08: A. Ciarreta (U. del País Vasco) – Volatility transmissions in the Spanish intra-day electricity market

Información

Abstract

This paper analyzes the volatility transmissions between the different sessions of the Spanish intra-day electricity market for the period 2002-2013 using hourly prices. Based on the intra-day realized volatility and the organization of the market, volatility can only be transmitted from session 1 to 6 in chronological order, which allows formulate six Autoregressive Distributed Lag (ADL) models in which inference on volatility transmissions can be conducted. Besides, taking into account that realized volatility usually presents strong persistence, using the framework of the Heterogeneous Autoregressive model of Realized Volatility (HAR-RV) we consider parsimonious models. Preliminary results show that the volatility transmissions from a session to the others occur basically at the same day, although lagged realized volatility from other sessions may also be significant. Given that the electricity prices exhibit extreme jumps, realized volatility is decomposed into jump and non-jump components. The dynamics of price volatility are again studied in the ADL models within the HAR-RV framework distinguishing between jump and non-jump components for each session of the market.