Related papers: On the Pricing of Storable Commodities
Continuous time models in the theory of real options give explicit formulas for optimal exercise strategies when options are simple and the price of an underlying asset follows a geometric Brownian motion. This paper suggests a general,…
We consider the pricing of derivatives in a setting with trading restrictions, but without any probabilistic assumptions on the underlying model, in discrete and continuous time. In particular, we assume that European put or call options…
This paper examines a heterogeneous beliefs model in which there is a process that is only partially observed by the agents. The economy contains a risky asset producing dividends continuously in time. The dividends are observed by the…
A recent model for the stock market calculates future price distributions of a stock as a wave function of a quantum particle confined in an infinite potential well. In such a model the question arose as to how to estimate the classical…
We investigate a statistical-static hedging technique for pricing assets considered as single-step stochastic cash flows. The valuation is based on constructing in a canonical way a European style derivative on a benchmark security such…
Electricity markets are experiencing a rapid increase in energy storage unit participation. Unlike conventional generation resources, quantifying the competitive operation and identifying if a storage unit is exercising market power is…
Although behavioral economics has demonstrated that there are many situations where rational choice is a poor empirical model, it has so far failed to provide quantitative models of economic problems such as price formation. We make a step…
We consider the pricing and hedging of exotic options in a model-independent set-up using \emph{shortfall risk and quantiles}. We assume that the marginal distributions at certain times are given. This is tantamount to calibrating the model…
In this paper we introduce a new approach to model-free path-dependent option pricing. We first introduce a general duality result for linear optimisation problems over signed measures introduced in [3] and show how the the problem of…
In stochastic multi-factor commodity models, it is often the case that futures prices are explained by two latent state variables which represent the short and long term stochastic factors. In this work, we develop the family of stochastic…
Presented is an analytic microeconomic model of the temporal price dispersion of homogeneous goods in polypoly markets. This new approach is based on the idea that the price dispersion has its origin in the dynamics of the purchase process.…
Pricing of high-dimensional options is a deep problem of the Theoretical Financial Mathematics. In this article we present a new class of L\'{e}vy driven models of stock markets. In our opinion, any market model should be based on a…
Proof that under simple assumptions, such as constraints of Put-Call Parity, the probability measure for the valuation of a European option has the mean derived from the forward price which can, but does not have to be the risk-neutral one,…
In the context of energy transition, industrial plants that heavily rely on electricity face more and more price volatility. To continue operating in these conditions, the directors become continually more willing to increase their…
This paper proposes a novel framework to price energy storage in economic dispatch with a social welfare maximization objective. This framework can be utilized by power system operators to generate default bids for storage or to benchmark…
Mainstream financial econometrics methods are based on models well tuned to replicate price dynamics, but with little to no economic justification. In particular, the randomness in these models is assumed to result from a combination of…
Income- and price-elasticity of demand quantify the responsiveness of markets to changes in income, and in prices, respectively. Under the assumptions of utility maximization and preference-independence (additive preferences), mathematical…
Pricing decisions of companies require an understanding of the causal effect of a price change on the demand. When real-life pricing experiments are infeasible, data-driven decision-making must be based on alternative data sources such as…
A promising approach to hedge against the inherent uncertainty of renewable generation is to equip the renewable plants with energy storage systems. This paper focuses on designing profit maximization offering strategies, i.e., the…
The determination of acceptability prices of contingent claims requires the choice of a stochastic model for the underlying asset price dynamics. Given this model, optimal bid and ask prices can be found by stochastic optimization. However,…