Forecasting of volatility and risk premia in electricity markets (opens in new tab)

We study forecasting of the realized covariation in electricity markets. The realized covariation in this context is a matrix-valued representation of the latent infinite-dimensional covariance operator and a parsimonious matrix-HAR type model is constructed to facilitate estimation. We test the model on one-week ahead forecasts of the weekly realized covariation and find that the inclusion of longer time horizons and renewable generation info...