CREATES lunch seminar: Wei Wei, Aarhus University and CREATES

Title: A Generalized Schwartz Model for Energy Spot Prices - Estimation using a Particle MCMC Method

Info about event

Time

Tuesday 9 September 2014,  at 12:00 - 12:30

Location

Fuglesangs Allé 4, 8210 Aarhus V, building 2628, room 303

Abstract
We consider a two-factor geometric spot price model with stochastic volatility and jumps. The first factor models the normal variations of the price process and the other factor accounts for the presence of spikes. Instead of using various filtering techniques for splitting the two factors, as often found in the literature, we estimate the model in one step using a MCMC method with a particle filter. In our empirical analysis we fit the model to UK natural gas spot prices and investigate the importance of allowing for jumps and stochastic volatility. We find that the inclusion of stochastic volatility in the process used for modeling the normal price variations is crucial and that it strongly impacts the jump intensity in the spike process. Furthermore, our estimation method enables us to consider both a continuous and purely jump-driven specification of the volatility process, and thereby assess if the volatility specification also influences the spike process and the overall model fit.

CREATES arranges lunch seminars on a regular basis, normally on Tuesdays. The speakers are usually CREATES members, mostly PhD-students and postdocs. The speakers can also be visiting PhD-students or professors.

Each lunch seminar is followed by a discussion of the paper presented.

Organizers: Wei Wei and Gustavo Fruet Dias.

Place: CREATES meeting room, M303, building 2628 (M)

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