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In this paper we consider the pricing of options on interest rates such as caplets and swaptions in the L\'evy Libor model developed by Eberlein and \"Ozkan (2005). This model is an extension to L\'evy driving processes of the classical…
We consider the problem of forecasting the aggregate demand of a pool of price-responsive consumers of electricity. The price-response of the aggregation is modeled by an optimization problem that is characterized by a set of marginal…
For a converging sequence of exponential L\'evy models, we give conditions under which the associated sequence of option prices converges. We also study the behaviour of the prices when no such convergence holds. We then consider two…
We propose a novel machine learning approach for probabilistic forecasting of hourly day-ahead electricity prices. In contrast with the recent advances in data-rich probabilistic forecasting, which approximates distributions with few…
This paper presents a new hybrid model for predicting German electricity prices. The algorithm is based on a combination of Gaussian Process Regression (GPR) and Support Vector Regression (SVR). Although GPR is a competent model for…
Here we develop an option pricing method based on Legendre series expansion of the density function. The key insight, relying on the close relation of the characteristic function with the series coefficients, allows to recover the density…
We introduce a local volatility model for the valuation of options on commodity futures by using European vanilla option prices. The corresponding calibration problem is addressed within an online framework, allowing the use of multiple…
There are several approaches to modeling and forecasting time series as applied to prices of commodities and financial assets. One of the approaches is to model the price as a non-stationary time series process with heteroscedastic…
The aim of this article is to provide a systematic analysis of the conditions such that Fourier transform valuation formulas are valid in a general framework; i.e. when the option has an arbitrary payoff function and depends on the path of…
In this paper we develop a framework for discretely compounding interest rates which is based on the forward price process approach. This approach has a number of advantages, in particular in the current market environment. Compared to the…
We discuss stochastic modeling of volatility persistence and anti-correlations in electricity spot prices, and for this purpose we present two mean-reverting versions of the multifractal random walk (MRW). In the first model the…
We establish several closed pricing formula for various path-independent payoffs, under an exponential L\'evy model driven by the Variance Gamma process. These formulas take the form of quickly convergent series and are obtained via tools…
We propose a new cognitive framework for option price modelling, using quantum neural computation formalism. Briefly, when we apply a classical nonlinear neural-network learning to a linear quantum Schr\"odinger equation, as a result we get…
We introduce a high-dimensional factor model with time-varying loadings. We cover both stationary and nonstationary factors to increase the possibilities of applications. We propose an estimation procedure based on two stages. First, we…
In this paper we propose a new method for probabilistic forecasting of electricity prices. It is based on averaging point forecasts from different models combined with expectile regression. We show that deriving the predicted distribution…
This paper studies the pricing of European-style Asian options when the price dynamics of the underlying risky asset are assumed to follow a Markov- modulated geometric Brownian motion; that is, the appreciation rate and the volatility of…
In this paper, dual generalized long memory modelling has been proposed to predict the electricity spot price. First, we focus on modelling the conditional mean of the series so we adopt a generalized fractional k-factor Gegenbauer process…
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…
A stochastic model for pure-jump diffusion (the compound renewal process) can be used as a zero-order approximation and as a phenomenological description of tick-by-tick price fluctuations. This leads to an exact and explicit general…
We study the pricing problem for a European call option when the volatility of the underlying asset is random and follows the exponential Ornstein-Uhlenbeck model. The random diffusion model proposed is a two-dimensional market process that…