A conditionally heteroskedastic model with time-varying coefficients for daily gas spot prices

Regnard, Nazim and Zakoian, Jean-Michel (2010): A conditionally heteroskedastic model with time-varying coefficients for daily gas spot prices.

Abstract

A novel GARCH(1,1) model, with coefficients function of the realizations of an exogenous process, is considered for the volatility of daily gas prices. A distinctive feature of the model is that it produces non-stationary solutions. The probability properties, and the convergence and asymptotic normality of the Quasi-Maximum Likelihood Estimator (QMLE) have been derived by Regnard and Zakoian (2009). The prediction properties of the model are considered. We derive a strongly consistent estimator of the asymptotic variance of the QMLE. An application to daily gas spot prices from the Zeebruge market is presented. Apart from conditional heteroskedasticity, an empirical finding is the existence of distinct volatility regimes depending on the temperature level.

• Item Type: MPRA Paper
• Language: English
• Keywords: GARCH; Gas prices; Nonstationary models; Periodic models; Quasi-maximum likelihood estimation; Time-varying coefficients
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C53 - Forecasting and Prediction Methods ; Simulation Methods; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes

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