Related papers: Utility indifference pricing and hedging for struc…
We develop a tractable equilibrium model for price formation in intraday electricity markets in the presence of intermittent renewable generation. Using stochastic control theory, we identify the optimal strategies of agents with market…
High shares of variable renewable energy necessitate substantial energy storage capacity. However, it remains unclear how to design a market that, on the one hand, ensures a stable and sufficient income for storage firms, and, on the other…
This paper presents an integrated model for bidding energy storage in day-ahead and real-time markets to maximize profits. We show that in integrated two-stage bidding, the real-time bids are independent of day-ahead settlements, while the…
In this paper we study the pricing and hedging of nonreplicable contingent claims, such as long-term insurance contracts like variable annuities. Our approach is based on the benchmark-neutral pricing framework of Platen (2024), which…
This paper introduces a novel decision-focused framework for energy storage arbitrage bidding. Inspired by the bidding process for energy storage in electricity markets, we propose a predict-then-bid end-to-end method incorporating the…
In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…
We provide a practical superhedging strategy for the pricing and hedging of the No-Negative-Equity-Guarantee (NNEG) found in Equity-Release Mortgages (ERMs), or reverse mortgages, using a discrete-time model. In contrast to many papers on…
This paper applies computational techniques of convex stochastic optimization to optimal operation and valuation of electricity storages in the face of uncertain electricity prices. Our approach is applicable to various specifications of…
In electricity markets, futures contracts typically function as a swap since they deliver the underlying over a period of time. In this paper, we introduce a market price for the delivery periods of electricity swaps, thereby opening an…
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…
We study the problem of maximising terminal utility for an agent facing model uncertainty, in a frictionless discrete-time market with one safe asset and finitely many risky assets. We show that an optimal investment strategy exists if the…
We consider insurance derivatives depending on an external physical risk process, for example a temperature in a low dimensional climate model. We assume that this process is correlated with a tradable financial asset. We derive optimal…
In an arbitrage-free simple market, we demonstrate that for a class of state-dependent exponential utilities, there exists a unique prediction of the random risk aversion that ensures the consistency of optimal strategies across any time…
The cryptocurrency market is volatile, non-stationary and non-continuous. Together with liquid derivatives markets, this poses a unique opportunity to study risk management, especially the hedging of options, in a turbulent market. We study…
We apply a utility-based method to obtain the value of a finite-time investment opportunity when the underlying real asset is not perfectly correlated to a traded financial asset. Using a discrete-time algorithm to calculate the…
Quantity and price risks are key uncertainties market participants face in electricity markets with increased volatility, for instance, due to high shares of renewables. From day ahead until real-time, there is a large variation in the best…
Efficiently accommodating uncertain renewable resources in wholesale electricity markets is among the foremost priorities of market regulators in the US, UK and EU nations. However, existing deterministic market designs fail to internalize…
Energy storage can absorb variability from the rising number of wind and solar power producers. Storage is different from the conventional generators that have traditionally balanced supply and demand on fast time scales due to its hard…
Bielecki and Rutkowski (2014) introduced and studied a generic nonlinear market model, which includes several risky assets, multiple funding accounts and margin accounts. In this paper, we examine the pricing and hedging of contract both…
This paper proposes an agent-based model that combines both spot and balancing electricity markets. From this model, we develop a multi-agent simulation to study the integration of the consumers' flexibility into the system. Our study…