Related papers: Utility indifference pricing and hedging for struc…
We consider the Bachelier model with information delay where investment decisions can be based only on observations from $H>0$ time units before. Utility indifference prices are studied for vanilla options and we compute their non-trivial…
In this paper, we study decentralized decision-making where agents optimize private objectives under incomplete information and imperfect public monitoring, in a non-cooperative setting. By shaping utilities-embedding shadow prices or…
Stability of the utility maximization problem with random endowment and indifference prices is studied for a sequence of financial markets in an incomplete Brownian setting. Our novelty lies in the nonequivalence of markets, in which the…
Market-based coordination of demand side assets has gained great interests in recent years. In spite of its efficiency, there is a risk that the interaction between the dynamic assets through the price signal could result in an unstable…
The paper studies derivative asset analysis in structural credit risk models where the asset value of the firm is not fully observable. It is shown that in order to compute the price dynamics of traded securities one needs to solve a…
We prove results on bounded solutions to backward stochastic equations driven by random measures. Those bounded BSDE solutions are then applied to solve different stochastic optimization problems with exponential utility in models where the…
In a market with stochastic interest rates, we consider an investor who can either (i) invest all if his money in a savings account or (ii) purchase zero-coupon bonds and invest the remainder of his wealth in a savings account. The…
This paper studies risk in a stochastic auction which facilitates the integration of renewable generation in electricity markets. We model market participants who are risk averse and reflect their risk aversion through coherent risk…
As operators acting on the undetermined final settlement of a derivative security, expectation is linear but price is non-linear. When the market of underlying securities is incomplete, non-linearity emerges from the bid-offer around the…
In the context of energy market clearing, non-merchant assets are assets that do not submit bids but whose operational constraints are included. Integrating energy storage systems as non-merchant assets can maximize social welfare. However,…
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…
Reduced installation and operating costs give energy storage systems an opportunity to participate actively and profitably in electricity markets. In addition to providing ancillary services, energy storage systems can also arbitrage…
We consider two market designs for a network of prosumers, trading energy: (i) a centralized design which acts as a benchmark, and (ii) a peer-to-peer market design. High renewable energy penetration requires that the energy market design…
Energy storage are strategic participants in electricity markets to arbitrage price differences. Future power system operators must understand and predict strategic storage arbitrage behaviors for market power monitoring and capacity…
We study a general robust utility maximization problem in a discrete-time frictionless market. The investor is assumed to have a possibly infinite, random, nonconcave, and nondecreasing utility function defined on the whole real line. She…
Energy storage resources must consider both price uncertainties and their physical operating characteristics when participating in wholesale electricity markets. This is a challenging problem as electricity prices are highly volatile, and…
We introduce a new and highly tractable structural model for spot and derivative prices in electricity markets. Using a stochastic model of the bid stack, we translate the demand for power and the prices of generating fuels into electricity…
We use a continuous version of the standard deviation premium principle for pricing in incomplete equity markets by assuming that the investor issuing an unhedgeable derivative security requires compensation for this risk in the form of a…
The use of energy storage to balance electric grids is increasing and, with it, the importance of operational optimisation from the twin viewpoints of cost and system stability. In this paper we assess the real option value of balancing…
In this paper, we explore the pricing and hedging strategies for an innovative insurance product called the equity protection swap(EPS). Notably, we focus on the application of EPSs involving cross-currency reference portfolios, reflecting…