Backtesting Expected Shortfall with a skewed exponential power distribution in electricity markets

Abstract : Interest in risk measurement for spot price has increased since the worldwide deregulation and liberalization of electricity started in the early 90's. This paper is focused on quantifying risk for the Swedish spot price. Our analysis is based on a generalized autoregressive conditional heteroskedastic (GARCH) process with skewed exponential power innovations to model the stochastic component of the price. A Expected Shortfall (ES) backtesting procedure is presented and our model performance is compared to commonly used distributions in risk measurement. We show that the skewed exponential power distribution outperforms the competitors for the upside risk, which is of high interest as electricity spot prices are positively skewed.
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https://hal-centralesupelec.archives-ouvertes.fr/hal-01578831
Contributor : Pascal Bondon <>
Submitted on : Tuesday, August 29, 2017 - 6:36:23 PM
Last modification on : Tuesday, October 2, 2018 - 3:14:03 PM

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Aymeric Thibault, Pascal Bondon. Backtesting Expected Shortfall with a skewed exponential power distribution in electricity markets. 24th European Signal Processing Conference (EUSIPCO), Aug 2016, Budapest, Hungary. pp.2141-2145, ⟨10.1109/eusipco.2016.7760627⟩. ⟨hal-01578831⟩

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