Related papers: Hedging Expected Losses on Derivatives in Electric…
We propose a general framework for the simultaneous modeling of equity, government bonds, corporate bonds and derivatives. Uncertainty is generated by a general affine Markov process. The setting allows for stochastic volatility, jumps, the…
In this paper analytic formulas for electricity derivatives are calculated. To this end, we assume that electricity spot prices follow a 3-regime Markov regime-switching model with independent spikes and drops and periodic transition…
Electricity price forecasting has become a critical tool for decision-making in energy markets, particularly as the increasing penetration of renewable energy introduces greater volatility and uncertainty. Historically, research in this…
One of the shortcomings of the Black and Scholes model on option pricing is the assumption that trading of the underlying asset does not affect the price of that asset. This assumption can be fulfilled only in perfectly liquid markets.…
The implementation of electricity markets based on locational marginal pricing in a multi-settlement process has allowed wholesale competition, with pricing mechanisms that incentivize the optimal allocation of generation, transmission, and…
We present a perturbation theory of the market impact based on an extension of the framework proposed by [Loeper, 2018] -- originally based on [Liu and Yong, 2005] -- in which we consider only local linear market impact. We study the…
We study the hedging and valuation of European and American claims on a non-traded asset $Y$, when a traded stock $S$ is available for hedging, with $S$ and $Y$ following correlated geometric Brownian motions. This is an incomplete market,…
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…
Working on the daily closing prices and logreturns, in this paper we deal with the use of Hidden Markov Models (HMMs) to forecast the price of the EUR/USD Futures. The aim of our work is to understand how the HMMs describe different…
Mathematical modelling is ubiquitous in the financial industry and drives key decision processes. Any given model provides only a crude approximation to reality and the risk of using an inadequate model is hard to detect and quantify. By…
This paper examines replication portfolio construction in incomplete markets - a key problem in financial engineering with applications in pricing, hedging, balance sheet management, and energy storage planning. We model this as a…
Traditional electric energy markets do not explicitly model generator contingencies. To improve the representation of resources and to enhance the modeling of uncertainty, existing markets are moving in the direction of including generator…
This paper develops learning-augmented algorithms for energy trading in volatile electricity markets. The basic problem is to sell (or buy) $k$ units of energy for the highest revenue (lowest cost) over uncertain time-varying prices, which…
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…
This study aims to address the challenges of futures price prediction in high-frequency trading (HFT) by proposing a continuous learning factor predictor based on graph neural networks. The model integrates multi-factor pricing theories…
In this paper we derive robust super- and subhedging dualities for contingent claims that can depend on several underlying assets. In addition to strict super- and subhedging, we also consider relaxed versions which, instead of eliminating…
A classical inventory problem is studied from the perspective of embedded options, reducing inventory-management to the design of optimal contracts for forward delivery of stock (commodity). Financial option techniques \`{a} la…
Mobile edge computing (MEC) has emerged as one of the key technical aspects of the fifth-generation (5G) networks. The integration of MEC with resource-constrained unmanned aerial vehicles (UAVs) could enable flexible resource provisioning…
A derivative is a financial security whose value is a function of underlying traded assets and market outcomes. Pricing a financial derivative involves setting up a market model, finding a martingale (``fair game") probability measure for…
Recent studies concerning the point electricity price forecasting have shown evidence that the hourly German Intraday Continuous Market is weak-form efficient. Therefore, we take a novel, advanced approach to the problem. A probabilistic…