frunze_2007.doc - MODELING SPOT PRICES IN UKRAINIAN...

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MODELING SPOT PRICES IN MODELING SPOT PRICES IN UKRAINIAN WHOLESALE ELECTRICITY UKRAINIAN WHOLESALE ELECTRICITY MARKET MARKET by Sergiu Frunze A thesis submitted in partial fulfillment of the requirements for the degree of Master of Arts in Economics National University “Kyiv-Mohyla Academy” Economics Education and Research Consortium Master’s Program in Economics 2007 Approved by _________________________________________________ Mr. Serhiy Korablin (Head of the State Examination Committee) ___________________________________________________ ___________________________________________________ ___________________________________________________
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Program Authorized to Offer Degree Master’s Program in Economics, NaUKMA Date _________________________________________________________
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National University “Kyiv-Mohyla Academy” Abstract MODELING SPOT PRICES IN MODELING SPOT PRICES IN UKRAINIAN WHOLESALE UKRAINIAN WHOLESALE ELECTRICITY MARKET ELECTRICITY MARKET by Sergiu Frunze Head of the State Examination Committee: Mr. Serhiy Korablin Economist, National Bank of Ukraine In this paper we investigate the behavior of spot electricity prices in Ukrainian Wholesale Electricity Market. The data covers the period from January 2003 to January 2007. The price behavior is estimated by a GARCH, TGARCH and EGARCH model in order to capture the asymmetry effects of “bad news” and “good news” on the conditional volatility.
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The analysis starts by examining the seasonal behavior of the spot electricity prices such as intra-daily, weekly and monthly. The findings also reveal a high degree of volatility persistence. An “inverse leverage effect” is found which means that positive innovations have a bigger impact on the conditional volatility than negative shocks do.
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TABLE OF CONTENTS Introduction ………………………………………………………… .... 1 Literature Review……………………………………….………….. …..4 Data description …………………………………………………….… 10 Methodology ……………………………………………………….. ….16 Empirical Results ……………………………………………………… 19
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Conclusions …………………………………….……………………… 25 Bibliography ……………………………………………………… .... 27 ii
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LIST OF FIGURES Number Page Figure 1. Average hourly electricity prices across the entire sample … ......... …12 Figure 2. A sample of hourly electricity prices………………………….… .... 12 Figure 3. Average daily prices across the entire sample ………………….…..13 Figure 4. Empirical histogram of average daily prices………………….……13 Figure 5 . Autocorrelation function for level electricity prices…………..……14 Table 1. Descriptive statistics……………………………………………..…13 Table 2 . Results for Augmented Dickey-Fuller test for unit root………… ....... 14 Table 3 . The main equations……………………………………………… .... 20 iii
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Table 3 (continued). The main equations …………………………………..21 Table 4. The equations for conditional variances ………………………...…..23 iv
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ACKNOWLEDGMENTS
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  • Spring '08
  • Lingham,R
  • Electricity market, electricity prices, Knittel, Ukrainian Electricity Wholesale

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