A long-term price risk early-warning model of electricity company based on EGARCH and VAR

In china´s electricity market, the risk of price fluctuation is significant to grid corporations. A historically reality, the electricity price in market is of gathering effects and heteroscedasticity. Furthermore, the key role of grid corporations in electricity market induces that the same scope of rise and down in price have different impacts on them, which called “lever effect”. Based on exponential generalized autoregressive conditional heteroscedasticity and Value-at-Risk theory, we define the risk factor of price fluctuation and establish price risk early-warning model. The empirical analysis demonstrates that the model complements the conventional methods and has high precision. The model can supervise the market price and conduct warning signals. So the grid corporations can take timely countermeasures.