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We consider the problem of pricing American Exchange options driven by a L\'evy process. We study the properties of American Exchange options, we represented it as the sum of the price of the corresponding European exchange option price and…
We derive a recursive formula for arithmetic Asian option prices with finite observation times in semimartingale models. The method is based on the relationship between the risk-neutral expectation of the quadratic variation of the return…
We describe a model for evolving commodity forward prices that incorporates three important dynamics which appear in many commodity markets: mean reversion in spot prices and the resulting Samuelson effect on volatility term structure,…
In our paper we analyze the relationship between the day-ahead electricity price of the Energy Exchange Austria (EXAA) and other day-ahead electricity prices in Europe. We focus on markets, which settle their prices after the EXAA, which…
We study a novel pricing operator for complete, local martingale models. The new pricing operator guarantees put-call parity to hold for model prices and the value of a forward contract to match the buy-and-hold strategy, even if the…
We propose a fast and accurate numerical method for pricing European swaptions in multi-factor Gaussian term structure models. Our method can be used to accelerate the calibration of such models to the volatility surface. The pricing of an…
Polynomial processes have the property that expectations of polynomial functions (of degree $n$, say) of the future state of the process conditional on the current state are given by polynomials (of degree $\leq n$) of the current state.…
The objective of the paper is to price weather contracts using temperature as the underlying process when the later follows a mean-reverting dynamics driven by a time-changed Brownian motion coupled to a Gamma Levy subordinator 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…
In this paper a simple model for the evolution of the forward density of the future value of an asset is proposed. The model allows for a straightforward initial calibration to option prices and has dynamics that are consistent with…
In this article we present a continuous time model for natural gas and crude oil future prices. Its main feature is the possibility to link both energies in the long term and in the short term. For each energy, the future returns are…
In this paper we develop numerical pricing methodologies for European style Exchange Options written on a pair of correlated assets, in a market with finite liquidity. In contrast to the standard multi-asset Black-Scholes framework, trading…
We study the prices of European Emission Allowances (EUA), whereby we analyze their uncertainty and dependencies on related energy prices (natural gas, coal, and oil). We propose a probabilistic multivariate conditional time series model…
Motivated by the increasing integration among electricity markets, in this paper we propose two different methods to incorporate market integration in electricity price forecasting and to improve the predictive performance. First, we…
We extend the now classic structural credit modeling approach of Black and Cox to a class of "two-factor" models that unify equity securities such as options written on the stock price, and credit products like bonds and credit default…
We consider a 2-dimensional marked Hawkes process with increasing baseline intensity in order to model prices on electricity intraday markets. This model allows to represent different empirical facts such as increasing market activity,…
Modeling price risks is crucial for economic decision making in energy markets. Besides the risk of a single price, the dependence structure of multiple prices is often relevant. We therefore propose a generic and easy-to-implement method…
The European Power Exchange has introduced day-ahead auctions and continuous trading spot markets to facilitate the insertion of renewable electricity. These markets are designed to balance excess or lack of power in short time periods,…
Accurate prediction of electricity prices plays an essential role in the electricity market. To reflect the uncertainty of electricity prices, price intervals are predicted. This paper proposes a novel prediction interval construction…
The accurate valuation of financial derivatives plays a pivotal role in the finance industry. Although closed formulas for pricing are available for certain models and option types, exemplified by the European Call and Put options in the…