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A0336
Title: Understanding volatility spillovers between European electricity spot markets Authors:  Ainhoa Zarraga - University of the Basque Country (Spain) [presenting]
Evelyn Lizeth Chanatasig - University of the Basque Country (Spain)
Aitor Ciarreta - University of the Basque Country (Spain)
Cristina Pizarro-Irizar - University of the Basque Country (Spain)
Abstract: The process towards integration of European electricity markets continues despite many obstacles in the path. The benefits of further market integration are not being accomplished due to uncompleted market coupling of national markets, insufficient interconnections and a lack of harmonization of national regulatory policies. A significant feature of electricity prices is that they are significantly more volatile than other comparable financial or commodity markets. Our study examines volatility spillover effects across markets in a model that includes covariances with the aim of achieving a better understanding of the transmission of risks. We conduct both a static and dynamic analysis of aggregated spillover effects as well as their directional decomposition between markets. We find that there are significant spillovers across markets. We also relate the dynamic spillover patterns to specific market events, such as the creation of the single intraday continuous market. Our findings provide useful information for market stakeholders to understand the expected outcomes of further integration initiatives.