23 Pages Posted: 2 Oct 2007
Date Written: 2006
The aim of this paper is to illustrate how the stability of a stochastic dynamic system is measured using the Lyapunov exponents. Specifically, we use a feedforward neural network to estimate these exponents as well as asymptotic results for this estimator to test for unstable (chaotic) dynamics. The data set used is spot electricity prices from the Nordic power exchange market. Nord Pool, and the dynamic system that generates these prices appears to be chaotic in one case.
Keywords: feedforward neural network, Nord Pool, Lyapunov exponents, spot electricity prices, stochastic dynamic system
JEL Classification: C12, C14, C22
Suggested Citation: Suggested Citation
Bask, Mikael and Liu, Tung and Widerberg, Anna, The Stability of Electricity Prices: Estimation and Inference of the Lyapunov Exponents (2006). Bank of Finland Research Discussion Paper No. 9/2006. Available at SSRN: https://ssrn.com/abstract=1018333 or http://dx.doi.org/10.2139/ssrn.1018333
By Mikael Bask