Related papers: Pricing electricity derivatives within a Markov re…
In this work we analyse a stochastic control problem for the valuation of a natural gas power station while taking into account operating characteristics. Both electricity and gas spot price processes exhibit mean-reverting spikes and…
Travel time derivatives are financial instruments that derive their value from road travel times, serving as an underlying asset that cannot be directly traded. Within the transportation domain, these derivatives are proposed as a more…
The growing importance of intraday electricity trading in Europe calls for improved price forecasting and tailored decision-support tools. In this paper, we propose a novel generative neural network model to generate probabilistic path…
We propose a method for extending a given asset pricing formula to account for two additional sources of risk: the risk associated with future changes in market--calibrated parameters and the remaining risk associated with idiosyncratic…
In two-stage electricity markets, renewable power producers enter the day-ahead market with a forecast of future power generation and then reconcile any forecast deviation in the real-time market at a penalty. The choice of the forecast…
In a stochastic volatility framework, we find a general pricing equation for the class of payoffs depending on the terminal value of a market asset and its final quadratic variation. This allows a pricing tool for European-style claims…
When trading American and Asian options in the FX derivatives market, banks must calculate prices using a complex mathematical model. It is often observed that different models produce varying prices for the same exotic option, which…
The extraordinary electric vehicle (EV) popularization in the recent years has facilitated research studies in alleviating EV energy charging demand. Previous studies primarily focused on the optimizations over charging stations (CS) profit…
The increasing penetration of variable renewable energy and flexible demand technologies, such as electric vehicles and heat pumps, introduces significant uncertainty in power systems, resulting in greater imbalance; defined as the…
An efficient computational algorithm to price financial derivatives is presented. It is based on a path integral formulation of the pricing problem. It is shown how the path integral approach can be worked out in order to obtain fast and…
In Electricity markets, illiquidity, transaction costs and market price characteristics prevent managers to replicate exactly contracts. A residual risk is always present and the hedging strategy depends on a risk criterion chosen. We…
In response to the increasing deployment of battery storage systems for cost reduction and grid stress mitigation, this study presents the development of a new real-time Markov decision process model to efficiently schedule battery systems…
We provide a lean, non-technical exposition on the pricing of path-dependent and European-style derivatives in the Cox-Ross-Rubinstein (CRR) pricing model. The main tool used in the paper for cleaning up the reasoning is applying static…
The European Power Exchange has introduced day-ahead auctions and continuous trading spot markets to facilitate the insertion of renewable electricity. These markets are designed to balance excess or lack of power in short time periods,…
We propose a scenario-oriented approach for energy-reserve joint procurement and pricing for electricity market. In this model, without the empirical reserve requirements, reserve is procured according to all possible contingencies and…
In the present paper we present a finite element approach for option pricing in the framework of a well-known stochastic volatility model with jumps, the Bates model. In this model the asset log-returns are assumed to follow a…
In this paper we present a theoretical framework for determining dynamic ask and bid prices of derivatives using the theory of dynamic coherent acceptability indices in discrete time. We prove a version of the First Fundamental Theorem of…
We apply the concepts of utility based pricing and hedging of derivatives in stochastic volatility markets and introduce a new class of "reciprocal affine" models for which the indifference price and optimal hedge portfolio for pure…
In this paper, we propose an equilibrium pricing model in a dynamic multi-period stochastic framework with uncertain income streams. In an incomplete market, there exist two traded risky assets (e.g. stock/commodity and weather derivative)…
Electricity is traded on various markets with different time horizons and regulations. Short-term intraday trading becomes increasingly important due to the higher penetration of renewables. In Germany, the intraday electricity price…