Intraday Empirical Analysis of Electricity Price

This paper proposes an approach to the intraday analysis of the dynam-ics of electricity prices. The growth optimal portfolio (GOP) is used as a reference unit in a continuous financial electricity price model. A diversified global portfolio in the form a market capitalisation weighted index approx-imates the GOP. The GOP, measured in units of electricity, is normalised and then modelled as a time transformed square root process of dimension four. The dynamics of the resulting process is empirically verified. Intra-day spot electricity prices from the US and Australian markets are used for this analysis. The empirical findings identify a simple but realistic model for examining the volatile behaviour of electricity prices. The proposed model re-flects the historical price evolution reasonably well by using only a few robust and readily observable parameters. The evolution of the transformed time is modelled via a rapidly evolving market activity. A periodic, ergodic process with deterministic volatility is used to model market activity