Tail risk of electricity futures

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dc.contributor.author Peña, Juan Ignacio
dc.contributor.author Rodríguez, Rosa
dc.contributor.author Mayoral, Silvia
dc.date.accessioned 2021-11-18T19:03:13Z
dc.date.issued 2020-09-05
dc.identifier.bibliographicCitation Peña, J. I., Rodríguez, R., & Mayoral, S. (2020). Tail risk of electricity futures. Energy Economics, 91, p. 104886
dc.identifier.issn 0140-9883
dc.identifier.uri http://hdl.handle.net/10016/33648
dc.description.abstract This paper compares the in-sample and out-of-sample performance of several models for computing the tail risk of one-month and one-year electricity futures contracts traded in the NordPool, French, German, and Spanish markets in 2008–2017. As measures of tail risk, we use the one-day-ahead Value-at-Risk (VaR) and the Expected Shortfall (ES). With VaR, the AR (1)-GARCH (1,1) model with Student-t distribution is the best-performing specification with 88% cases in which the Fisher test accepts the model, with a success rate of 94% in the left tail and of 81% in the right tail. The model passes the test of model adequacy in the 100% of the cases in the NordPool and German markets, but only in the 88% and 63% of the cases in the Spanish and French markets. With ES, this model passes the test of model adequacy in 100% of cases in all markets. Historical Simulation and Quantile Regression-based approaches misestimate tail risks. The right-hand tail of the returns is more difficult to model than the left-hand tail and therefore financial regulators and the administrators of futures markets should take these results into account when setting additional regulatory capital requirements and margin account regulations to short positions.
dc.description.sponsorship We acknowledge financial support from FUNCAS, through grant PRELEC2020–2017/00085/00, from DGICYT, through grant ECO2016–77807-P, and from CAM, through grant EARLYFIN-CM, #S2015/HUM-3353
dc.language.iso eng
dc.publisher Elsevier
dc.rights © Elsevier
dc.rights Atribución-NoComercial-SinDerivadas 3.0 España
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject.other Electricity markets
dc.subject.other Futures markets
dc.subject.other Value at risk
dc.subject.other Expected shortfall
dc.subject.other Backtesting
dc.title Tail risk of electricity futures
dc.type article
dc.subject.jel C51
dc.subject.jel G13
dc.subject.jel L94
dc.subject.jel Q40
dc.subject.eciencia Empresa
dc.identifier.doi https://doi.org/10.1016/j.eneco.2020.104886
dc.rights.accessRights embargoedAccess
dc.relation.projectID Comunidad de Madrid. S2015/HUM-3353
dc.relation.projectID Gobierno de España. ECO2016-77807-P
dc.type.version acceptedVersion
dc.identifier.publicationfirstpage 1
dc.identifier.publicationlastpage 16
dc.identifier.publicationtitle Energy Economics
dc.identifier.publicationvolume 91
dc.identifier.uxxi AR/0000026835
carlosiii.embargo.liftdate 2022-09-10
carlosiii.embargo.terms 2022-09-10
dc.contributor.funder Comunidad de Madrid
dc.contributor.funder Ministerio de Ciencia e Innovación (España)
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