Related papers: Hedging Swing contract on gas markets
Constant price impact functions, much used in financial literature, are shown to give rise to paradoxical outcomes since they do not allow for proper predictability removal: for instance the exploitation of a single large trade whose size…
Based on forward curves modelled as Hilbert-space valued processes, we analyse the pricing of various options relevant in energy markets. In particular, we connect empirical evidence about energy forward prices known from the literature to…
The usual theory of asset pricing in finance assumes that the financial strategies, i.e. the quantity of risky assets to invest, are real-valued so that they are not integer-valued in general, see the Black and Scholes model for instance.…
In this paper we develop a statistical arbitrage trading strategy with two key elements in hi-frequency trading: stop-loss and leverage. We consider, as in Bertram (2009), a mean-reverting process for the security price with proportional…
The duality between the robust (or equivalently, model independent) hedging of path dependent European options and a martingale optimal transport problem is proved. The financial market is modeled through a risky asset whose price is only…
We present the closed-form solution to the problem of hedging price and quantity risks for energy retailers (ER), using financial instruments based on electricity price and weather indexes. Our model considers an ER who is intermediary in a…
We study the upper and lower bounds for prices of European and American style options with the possibility of an external termination, meaning that the contract may be terminated at some random time. Under the assumption that the underlying…
We consider the problem of ESO valuation in continuous time. In particular, we consider models that assume that an appropriate random time serves as a proxy for anything that causes the ESO's holder to exercise the option early, namely,…
We introduce a novel signature approach for pricing and hedging path-dependent options with instantaneous and permanent market impact under a mean-quadratic variation criterion. Leveraging the expressive power of signatures, we recast an…
Environmental, Social, and Governance (ESG) finance is a cornerstone of modern finance and investment, as it changes the classical return-risk view of investment by incorporating an additional dimension of investment performance: the ESG…
We present an option pricing formula for European options in a stochastic volatility model. In particular, the volatility process is defined using a fractional integral of a diffusion process and both the stock price and the volatility…
We show how D4PG can be used in conjunction with quantile regression to develop a hedging strategy for a trader responsible for derivatives that arrive stochastically and depend on a single underlying asset. We assume that the trader makes…
This paper formulates dynamic density functions, based upon skewed-t and similar representations, to model and forecast electricity price spreads between different hours of the day. This supports an optimal day ahead storage and discharge…
We construct an aggregator for a family of Snell envelopes in a nondominated framework. We apply this construction to establish a robust hedging duality, along with the existence of a minimal hedging strategy, in a general semi-martingale…
Theoretical models applied to option pricing should take into account the empirical characteristics of the underlying financial time series. In this paper, we show how to price basket options when assets follow a shifted log-normal process…
We propose stochastic control policies to cope with uncertain and variable gas extractions in natural gas networks. Given historical gas extraction data, these policies are optimized to produce the real-time control inputs for nodal gas…
In power markets, Green Power Purchase Agreements have become an important contractual tool of the energy transition from fossil fuels to renewable sources such as wind or solar radiation. Trading Green PPAs exposes agents to price risks…
We propose a deep hedging framework for index option portfolios, grounded in a realistic market simulator that captures the joint dynamics of S&P 500 returns and the full implied volatility surface. Our approach integrates surface-informed…
The path probability of a particle undergoing stochastic motion is studied by the use of functional technique, and the general formula is derived for the path probability distribution functional. The probability of finding paths inside a…
In this paper the valuation problem of a European call option in presence of both stochastic volatility and transaction costs is considered. In the limit of small transaction costs and fast mean reversion, an asymptotic expression for the…