The Stability and Volatility of Electricity Prices: An Illustration of (λ, σ²) Analysis
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Date
2007-10-09T11:17:22Z
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Abstract
The aim of this letter is to discuss and illustrate what we call (λ, σ²)-
analysis, which is a method to distinguish between the stability of a
stochastic dynamic system and the volatility of a variable generated by
this system. It is also emphasized that this method is able to generate
new research questions for economic theory. The data set used in an
empirical illustration is spot electricity prices from Nord Pool.
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Keywords
Smooth Lyapunov Exponents, Stability, Stochastic Dynamic System, Volatility