Electricity spot price modelling with a view towards extreme spike risk
Sums of Lévy-driven Ornstein-Uhlenbeck processes seem appropriate for
modelling electricity spot price data. In this paper we present a new estimation method
with particular emphasis on capturing the high peaks, which is one of the stylized features
of such data. After introducing our method we show it at work for the EEX Phelix Base
electricity price index. We also present a small simulation study to show the performance
of our estimation procedure.