Related papers: Leverage effect in energy futures
The Constant Elasticity of Variance (CEV) model is mathematically presented and then used in a Credit-Equity hybrid framework. Next, we propose extensions to the CEV model with default: firstly by adding a stochastic volatility diffusion…
We use molecular dynamics simulation results on viscous binary Lennard-Jones mixtures to examine the correlation between the potential energy and the virial. In accord with a recent proposal [U. R. Pedersen et. al. Phys. Rev. Lett. 100,…
We study the dependence of volatility on the stock price in the stochastic volatility framework on the example of the Heston model. To be more specific, we consider the conditional expectation of variance (square of volatility) under fixed…
The introduction of leverage on prediction-market event contracts raises three structurally distinct questions that have not been addressed jointly: how leverage changes manipulation incentives, how it interacts with informed-trading rents,…
We investigate the behavior of energy fluctuations in several models of granular gases maintained in a non-equilibrium steady state. In the case of a gas heated from a boundary, the inhomogeneities of the system play a predominant role.…
The main focus of marine oil spill modelling is often on where the oil will end up, i.e., on the horizontal transport. However, due to current shear, wind drag, and the different physical, chemical and biological processes that affect oil…
Long-duration energy storage (LDES) is a key component for fully renewable, sector-coupled energy systems based on wind and solar. While capacity expansion planning has begun to take into account interannual weather variability, it often…
We study the volatility of the S&P500 stock index from 1984 to 1996 and find that the volatility distribution can be very well described by a log-normal function. Further, using detrended fluctuation analysis we show that the volatility is…
In this paper, we study the relationship between the short-end of the local and the implied volatility surfaces. Our results, based on Malliavin calculus techniques, recover the recent $\frac{1}{H+3/2}$ rule (where $H$ denotes the Hurst…
Based on a criterium of mathematical simplicity and consistency with empirical market data, a stochastic volatility model has been obtained with the volatility process driven by fractional noise. Depending on whether the stochasticity…
In this chapter we first briefly review the existing approaches to hedging in rough volatility models. Next, we present a simple but general result which shows that in a one-factor rough stochastic volatility model, any option may be…
We derive the arbitrage gains or, equivalently, Loss Versus Rebalancing (LVR) for arbitrage between \textit{two imperfectly liquid} markets, extending prior work that assumes the existence of an infinitely liquid reference market. Our…
Current research on energy related problems such as eco-routing, eco-driving and range prediction for electric vehicles (EVs) primarily considers the effect of longitudinal dynamics on EV energy consumption. However, real-world driving…
A key issue in the estimation of energy hedges is the hedgers' attitude towards risk which is encapsulated in the form of the hedgers' utility function. However, the literature typically uses only one form of utility function such as the…
We consider Stochastic Volatility processes with heavy tails and possible long memory in volatility. We study the limiting conditional distribution of future events given that some present or past event was extreme (i.e. above a level which…
Price fluctuations of commodities like cotton and wheat are thought to display probability distributions of returns that follow a L\'evy stable distribution. Recent analysis of stocks and foreign exchange markets show that the probability…
In an asset return series there is a conditional asymmetric dependence between current return and past volatility depending on the current return's sign. To take into account the conditional asymmetry, we introduce new models for asset…
I study the dynamic, general equilibrium implications of climate-change-linked transition risk on macroeconomic outcomes and asset prices. Climate-change-linked expectations of fossil fuel restrictions can produce a ``run on fossil fuels''…
It is common knowledge that leverage can increase the potential returns of an investment, at the expense of increased risk. For a passive investor in the stock market, leverage can be achieved using margin debt or leveraged-ETFs. We perform…
One stylized feature of financial volatility impacting the modeling process is long memory. This paper examines long memory for alternative risk measures, observed absolute and squared returns for Daily REITs and compares the findings for a…