studying the Iranian Electricity Market Price with an ARMAX-GARCH Mode

Predicting price volatility has been the interest of many scholars in different markets such as stock and commodity market. Electricity like other commodities has been traded in the market in recent years. Hence, a large number of countries around the world have recently started restructuring processes in their energy sectors. However, the pace and aim of the improvements varies across countries. With the introduction of competitive wholesale electricity markets, and power derivative contracts, both exchange-traded and over the counter (OTC), providing a number of different contract provisions to meet the needs of the electricity market participants. Among all countries, Iran is not an exception for the rule. Trading electricity along other commodities in the exchange market is a new progress for this market. These changes arises this necessity to study the nature of price volatilities so that the restructuring development and adopted actions would be done in a correct and meaningful way.
This study attempts to study the price volatilities in the Iranian electricity market by an ARMAX and GARCH type model and introduce the best simulation for the period of March 2012 to March 2014. Therefore, ARMAX model in a combination with GARCH, GJR-GARCH, and EGARCH type will be compared along with Gaussian, Generalize Error, and Student-t distribution.