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A New Approach to Measure Volatility in Energy Markets
Department of Applied Mathematics and Statistics, Universidad Politécnica de Cartagena, Cartagena 30202, Spain
Department of Electrical Engineering, Universidad Politécnica de Cartagena, Cartagena 30202, Spain
* Author to whom correspondence should be addressed.
Received: 15 November 2011; in revised form: 4 January 2012 / Accepted: 18 January 2012 / Published: 23 January 2012
Abstract: Several measures of volatility have been developed in order to quantify the degree of uncertainty of an energy price series, which include historical volatility and price velocities, among others. This paper suggests using the permutation entropy, topological entropy and the modified permutation entropy as alternatives to measure volatility in energy markets. Simulated data show that these measures are more appropriate to quantify the uncertainty associated to a time series than those based on the standard deviation or other measures of dispersion. Finally, the proposed method is applied to some typical electricity markets: Nord Pool, Ontario, Omel and four Australian markets.
Keywords: volatility; entropy; power markets
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MDPI and ACS Style
Ruiz, M.C.; Guillamón, A.; Gabaldón, A. A New Approach to Measure Volatility in Energy Markets. Entropy 2012, 14, 74-91.
Ruiz MC, Guillamón A, Gabaldón A. A New Approach to Measure Volatility in Energy Markets. Entropy. 2012; 14(1):74-91.
Ruiz, María del Carmen; Guillamón, Antonio; Gabaldón, Antonio. 2012. "A New Approach to Measure Volatility in Energy Markets." Entropy 14, no. 1: 74-91.