Related papers: Additive energy forward curves in a Heath-Jarrow-M…
The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are…
Load-serving entities which procure electricity from the wholesale electricity market to service end-users face significant quantity and price risks due to the volatile nature of electricity demand and quasi-fixed residential tariffs at…
In this article we consider affine generalizations of the Merton jump diffusion model [Merton, J. Fin. Econ., 1976] and the respective pricing of European options. On the one hand, the Brownian motion part in the Merton model may be…
Generating synthetic financial time series that preserve the statistical properties of real market data is essential for stress testing, risk model validation, and scenario design. Existing approaches struggle to simultaneously reproduce…
We discuss the product of $M$ rectangular random matrices with independent Gaussian entries, which have several applications including wireless telecommunication and econophysics. For complex matrices an explicit expression for the joint…
This work explores the use of a forward-backward martingale method together with a decoupling argument and entropic estimates between the conditional and averaged measures to prove a strong averaging principle for stochastic differential…
In order to deal with market power that sporadically results from contingencies (e.g., severe weather, plant outages) most electricity markets have institutions in charge of monitoring market performance and mitigating market power. The…
Leveraging a unique dataset of carbon futures option prices traded on the ICE market from December 2015 until December 2020, we present the results from an unprecedented calibration exercise. Within a multifactor stochastic volatility…
We derive an extremal fractional Gaussian by employing the L\'evy-Khintchine theorem and L\'evian noise. With the fractional Gaussian we then generalize the Black-Scholes-Merton option-pricing formula. We obtain an easily applicable and…
Demand response provides utilities with a mechanism to share with end users the stochasticity resulting from the use of renewable sources. Pricing is accordingly used to reflect energy availability, to allocate such a limited resource to…
Most energy and commodity markets exhibit mean-reversion and occasional distinctive price spikes, which results in demand for derivative products which protect the holder against high prices. To this end, in this paper we present exact and…
For a long time interest-rate models were built on a single yield curve used both for discounting and forwarding. However, the crisis that has affected financial markets in the last years led market players to revise this assumption and…
In this paper, we consider a generic interest rate market in the presence of roll-over risk, which generates spreads in spot/forward term rates. We do not require classical absence of arbitrage and rely instead on a minimal market viability…
The study of Day-Ahead prices in the electricity market is one of the most popular problems in time series forecasting. Previous research has focused on employing increasingly complex learning algorithms to capture the sophisticated…
We consider a large market model of defaultable assets in which the asset price processes are modelled as Heston-type stochastic volatility models with default upon hitting a lower boundary. We assume that both the asset prices and their…
We consider the pricing of energy spread options for spot prices following an exponential Ornstein-Uhlenbeck process driven by a sum of independent multivariate variance gamma processes, which gives rise to mean-reverting, infinite activity…
We introduce a general, simple, and computationally efficient framework for predicting day-ahead supply and demand merit-order curves, from which both point and probabilistic electricity price forecasts can be derived. We conduct a rigorous…
A multi-factor extension of the Hobson and Rogers (HR) model, incorporating a quadratic variance function (QHR model), is proposed and analysed. The QHR model allows for greater flexibility in defining the moving average filter while…
With the increasing integration of power plants into the frequency-regulation markets, the importance of optimal trading has grown substantially. This paper conducts an in-depth analysis of their optimal trading behavior in sequential…
Motivated by empirical observations on the interplay of trends and reversion, a lattice gas model of financial markets is presented. The shares of an asset are modeled by gas molecules that are distributed across a hidden social network of…