Volatility transmissions in the Spanish Intra-day electricity market

This paper analyzes the volatility transmissions between the different sessions of the Spanish Intraday electricity market for the period 2002-2013 using hourly prices. Based on the daily realized volatility and the organization of the market, volatility can only be transmitted from session 1 to 6 in chronological order, which allows to formulate six Autoregressive Distributed Lag models in which inference on volatility transmissions can be conducted. Within the Heterogenous Autoregressive Regression framework two different models are estimated. The first one (HAR-RV) explains the volatility in terms of its past, while the second (HAR-CV-JV) decomposes the volatility into continuous and jump components to capture extreme spikes. In-sample forecast criteria select HAR-CV-JV model for all Intraday sessions whereas out-of-sample criteria select HAR-RV.