Related papers: Pricing Reliability Options under different electr…
We obtain option pricing formulas for stock price models in which the drift and volatility terms are functionals of a continuous history of the stock prices. That is, the stock dynamics follows a nonlinear stochastic functional differential…
This paper investigates the stakes of introducing probabilistic approaches for the management of power system's security. In real-time operation, the aim is to arbitrate in a rational way between preventive and corrective control, while…
This paper focuses on the operation of an electricity market that accounts for participants that bid at a sub-minute timescale. To that end, we model the market-clearing process as a dynamical system, called market dynamics, which is…
We build a methodology that takes a given option price in the tails with strike $K$ and extends (for calls, all strikes > $K$, for puts all strikes $< K$) assuming the continuation falls into what we define as "Karamata Constant" over which…
The quanto option is a cross-currency derivative in which the pay-off is given in foreign currency and then converted to domestic currency, through a constant exchange rate, used for the conversion and determined at contract inception.…
Recently, the volatility associated with marginal prices has increased due to large scale integration of renewable generation. Price volatility is undesirable from a consumer perspective. To address this issue, we present a framework for…
The general and special repo rates are related with the prices of the European call- and American put-options. The evaluation takes into account specific business models of the parties in the repo agreement and the law restrictions. Using…
Electricity market operators worldwide use mixed-integer linear programming to solve the allocation problem in wholesale electricity markets. Prices are typically determined based on the duals of relaxed versions of this optimization…
The introduction of transaction costs into the theory of option pricing could lead not only to the change of return for options, but also to the change of the volatility. On the base of assumption of the portfolio analysis, a new equation…
Increased penetration of wind energy will make electricity market prices more volatile. As a result, market participants will bear increased financial risks, which impact investment decisions and in turn, makes it harder to achieve…
In an observed generalized semi-Markov regime, estimation of transition rate of regime switching leads towards calculation of locally risk minimizing option price. Despite the uniform convergence of estimated step function of transition…
In this paper we study the pricing of exchange options when underlying assets have stochastic volatility and stochastic correlation. An approximation using a closed-form approximation based on a Taylor expansion of the conditional price is…
Options have provided a field of much study because of the complexity involved in pricing them. The Black-Scholes equations were developed to price options but they are only valid for European styled options. There is added complexity when…
We price European options in a class of models in which the volatility of the underlying risky asset depends on the short rate of interest. Our study results in an explicit pricing formula that depends on knowledge of a characteristic…
We present an approach for pricing European call options in presence of proportional transaction costs, when the stock price follows a general exponential L\'{e}vy process. The model is a generalization of the celebrated work of Davis,…
The energetic flexibility of electric energy resources can be exploited when trading on wholesale energy and ancillary service markets. This paper considers the problem of a Balance Responsible Party to maximize its profit from trading on…
Prediction markets rely on liquidity to convert trades into informative prices, yet existing mechanisms fix liquidity ex ante. This restriction enforces a static trade-off between price responsiveness and worst-case loss despite inherently…
Valuation and parity formulas for both European-style and American-style exchange options are presented in a general financial model allowing for jumps, possibility of default and "bubbles" in asset prices. The formulas are given via…
This paper discusses the connection between mathematical finance and statistical modelling which turns out to be more than a formal mathematical correspondence. We like to figure out how common results and notions in statistics and their…
The variance gamma model is a widely popular model for option pricing in both academia and industry. In this paper, we provide a new perspective for pricing European style options for the variance gamma model by deriving closed-form…