Related papers: Pricing electricity derivatives within a Markov re…
We propose a very efficient method for pricing various types of lookback options under Markov models. We utilize the model-free representations of lookback option prices as integrals of first passage probabilities. We combine efficient…
We present a new approach for the pricing of interest rate derivatives which allows a direct computation of option premiums without deriving a (Black-Scholes type) partial differential equation and without explicitly solving the stochastic…
In the first quarter of 2006 Chicago Board Options Exchange (CBOE) introduced, as one of the listed products, options on its implied volatility index (VIX). This created the challenge of developing a pricing framework that can…
We consider the problem of determining the L\'evy exponent in a L\'evy model for asset prices given the price data of derivatives. The model, formulated under the real-world measure $\mathbb P$, consists of a pricing kernel…
In the framework of Black-Scholes-Merton model of financial derivatives, a path integral approach to option pricing is presented. A general formula to price European path dependent options on multidimensional assets is obtained and…
The objective of the paper is to price weather contracts using temperature as the underlying process when the later follows a mean-reverting dynamics driven by a time-changed Brownian motion coupled to a Gamma Levy subordinator and…
We price European options in a class of models in which the volatility of the underlying risky asset depends on the short rate of interest. Our study results in an explicit pricing formula that depends on knowledge of a characteristic…
The general method is proposed for constructing a family of martingale measures for a wide class of evolution of risky assets. The sufficient conditions are formulated for the evolution of risky assets under which the family of equivalent…
The rapid growth of weather-dependent renewable generation increases price volatility and imbalance penalty risk in power markets, creating the need for advanced quantitative trading strategies. We develop a data-driven continuous-time…
In recent years, there have been a lot of sharp changes in the oil price. These rapid changes cause the traditional models to fail in predicting the price behavior. The main reason for the failure of the traditional models is that they…
Prices of European call options in a regime-switching local volatility model can be computed by solving a parabolic system which generalises the classical Black and Scholes equation, giving these prices as functionals of the local…
We develop a model for the industry dynamics in the electricity market, based on mean-field games of optimal stopping. In our model, there are two types of agents: the renewable producers and the conventional producers. The renewable…
We study the pricing of derivative securities in financial markets modeled by a sub-mixed fractional Brownian motion with jumps (smfBm-J), a non-Markovian process that captures both long-range dependence and jump discontinuities. Under this…
The new technologies emerging in the energy sector pose new requirements for both the regulation and operation of the electricity grid. Revised tariff structures and the introduction of local markets are two approaches that could tackle the…
Pricing financial or real options with arbitrary payoffs in regime-switching models is an important problem in finance. Mathematically, it is to solve, under certain standard assumptions, a general form of optimal stopping problems in…
Modern market management systems continue to evolve due to the intentions to improve system security and reliability. This evolvement has been leading to a transition of market auction models from a deterministic structure with…
In this paper a real option approach for the valuation of real assets is presented. Two continuous time models used for valuation are described: geometric Brownian motion model and interest rate model. The valuation for electricity spread…
The availability of historical data related to electricity day-ahead prices and to the underlying price formation process is limited. In addition, the electricity market in Europe is facing a rapid transformation, which limits the…
This working paper presents a comprehensive study on the development and analysis of various electricity market models, focusing on continuous, discrete, and fractional-order approaches. The continuous model captures the ongoing…
We propose a multivariate elastic net regression forecast model for German quarter-hourly electricity spot markets. While the literature is diverse on day-ahead prediction approaches, both the intraday continuous and intraday call-auction…