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The energy transition is profoundly reshaping electricity market dynamics. It makes it essential to understand how renewable energy generation actually impacts electricity prices, among all other market drivers. These insights are critical…
A speculative agent with Prospect Theory preference chooses the optimal time to purchase and then to sell an indivisible risky asset to maximize the expected utility of the round-trip profit net of transaction costs. The optimization…
In this paper, we are presenting a method for estimation of market parameters modeled by jump diffusion process. The method proposed is based on Gibbs sampler, while the market parameters are the drift, the volatility, the jump intensity…
We study time-zero efficiency of electricity derivatives markets. By time-zero efficiency is meant a sequence of prices of derivatives contracts having the same underlying asset but different times to maturity which implies that prices…
Arguably the most important problem in quantitative finance is to understand the nature of stochastic processes that underlie market dynamics. One aspect of the solution to this problem involves determining characteristics of the…
Electricity price prediction plays a vital role in energy storage system (ESS) management. Current prediction models focus on reducing prediction errors but overlook their impact on downstream decision-making. So this paper proposes a…
The recent surge in valuations among AI related firms has renewed concerns that markets may be entering a new phase of speculative exuberance, especially in the technology and semiconductor sectors at the center of the AI investment wave.…
Several proposals for the reform of the euro area advocate the creation of a market in synthetic securities backed by portfolios of sovereign bonds. Most debated are the so-called European Safe Bonds or ESBies proposed by Brunnermeier,…
The problem of European-style option pricing in time-changed L\'{e}vy models in the presence of compound Poisson jumps is considered. These jumps relate to sudden large drops in stock prices induced by political or economical hits. As the…
This paper develops a dynamic factor model that uses euro area (EA) country-specific information on output and inflation to estimate an area-wide measure of the output gap. Our model assumes that output and inflation can be decomposed into…
How a shock to an individual sector propagates to the prices of other sectors and aggregates to GDP depends on how easily sectoral goods can be substituted in production, which is determined by the intermediate input substitution…
Accurately evaluating the real-time flexibility of electric vehicles (EVs) is necessary for EV aggregators to offer ancillary services. However, regulation-caused uncertain state-of-charge and random departure behavior complicate the…
This work examines a stochastic volatility model with double-exponential jumps in the context of option pricing. The model has been considered in previous research articles, but no thorough analysis has been conducted to study its quality…
This paper develops a comprehensive theoretical framework that imports concepts from stochastic thermodynamics to model price impact and characterize the feasibility of round-trip arbitrage in financial markets. A trading cycle is treated…
The transition to a cleaner energy mix, essential for achieving net-zero greenhouse gas emissions by 2050, will significantly increase demand for metals critical to renewable energy technologies. Energy Transition Metals (ETMs), including…
Weather and climate extremes such as heatwaves are crucial climate hazards to people and ecosystems worldwide. In any region, climate change may alter their characteristics in complex ways so that rigorous and holistic quantification of the…
This paper examines the degree of integration at euro area financial markets. To that end, we estimate overall and country-specific integration indices based on a panel vector-autoregression with factor stochastic volatility. Our results…
The price of electricity is far more volatile than that of other commodities normally noted for extreme volatility. The possibility of extreme price movements increases the risk of trading in electricity markets. However, underlying the…
We theoretically and empirically study portfolio optimization under transaction costs and establish a link between turnover penalization and covariance shrinkage with the penalization governed by transaction costs. We show how the ex ante…
We provide series expansions for the tempered stable densities and for the price of European-style contracts in the exponential L\'evy model driven by the tempered stable process. These formulas recover several popular option pricing…