A Conditionally Heteroskedastic Model with Time-varying Coefficients for Daily Gas Spot Prices

Zakoïan, Jean-Michel; Regnard, Nazim

Zakoïan, Jean-Michel; Regnard, Nazim (2011), A Conditionally Heteroskedastic Model with Time-varying Coefficients for Daily Gas Spot Prices, Energy Economics, 33, 6, p. 1240-1251. http://dx.doi.org/10.1016/j.eneco.2011.02.004

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Type

Article accepté pour publication ou publié

Date

2011

Journal name

Energy Economics

Volume

Number

Publisher

Elsevier

Pages

1240-1251

Abstract (EN)

This paper examines the relationship between gas spot prices at the Zeebrugge market, one-month ahead Brent prices and temperatures over the period 2000–2005. A cointegration analysis is carried out and it is discovered that a cointegration relationship exists between the three series. To take into account the influence of temperature on the gas volatility, a GARCH(1,1) model with temperature-dependent coefficients is considered. Stability and estimation properties are discussed. An empirical finding is the existence of distinct volatility regimes for the volatility of gas prices, depending on the temperature level.

Subjects / Keywords

Quasi-Maximum Likelihood Estimation; Time-Varying Coefficients; Periodic models; GARCH; Nonstationary Models; Gas Prices

JEL

C13 - Estimation: General
G13 - Contingent Pricing; Futures Pricing
C73 - Stochastic and Dynamic Games; Evolutionary Games; Repeated Games