Stochastic Path-Dependent Volatility Models for Price-Storage Dynamics in Natural Gas Markets and Discrete-Time Swing Option Pricing
Mathematical Finance
2025-07-22 v2
Abstract
This paper is devoted to the price-storage dynamics in natural gas markets. A novel stochastic path-dependent volatility model is introduced with path-dependence in both price volatility and storage increments. Model calibrations are conducted for both the price and storage dynamics. Further, we discuss the pricing problem of discrete-time swing options using the dynamic programming principle, and a deep learning-based method is proposed for numerical approximations. A numerical algorithm is provided, followed by a convergence analysis result for the deep-learning approach.
Keywords
Cite
@article{arxiv.2406.16400,
title = {Stochastic Path-Dependent Volatility Models for Price-Storage Dynamics in Natural Gas Markets and Discrete-Time Swing Option Pricing},
author = {Jinniao Qiu and Antony Ware and Yang Yang},
journal= {arXiv preprint arXiv:2406.16400},
year = {2025}
}