Related papers: Pricing commodity swing options
Accurate crude oil price prediction is crucial for financial decision-making. We propose a novel reservoir computing model for forecasting crude oil prices. It outperforms popular deep learning methods in most scenarios, as demonstrated…
We propose a method for extending a given asset pricing formula to account for two additional sources of risk: the risk associated with future changes in market--calibrated parameters and the remaining risk associated with idiosyncratic…
In a market with transaction costs, the price of a derivative can be expressed in terms of (preconsistent) price systems (after Kusuoka (1995)). In this paper, we consider a market with binomial model for stock price and discuss how to…
We propose two parametric approaches to evaluate swing contracts with firm constraints. Our objective is to define approximations for the optimal control, which represents the amounts of energy purchased throughout the contract. The first…
We propose a virtual bidding strategy by modeling the price differences between the day-ahead market and the real-time market as Brownian motion with drift, where the drift rate and volatility are functions of meteorological variables. We…
In this paper, we study the price of Variable Annuity Guarantees, especially of Guaranteed Annuity Options (GAO) and Guaranteed Minimum Income Benefit (GMIB), and this in the settings of a derivative pricing model where the underlying spot…
Continuous intraday electricity markets play an increasingly important role in short-term trading and balancing, yet decision-making under rapidly evolving price dynamics remains challenging. This paper proposes a comprehensive framework…
We consider the pricing and hedging of exotic options in a model-independent set-up using \emph{shortfall risk and quantiles}. We assume that the marginal distributions at certain times are given. This is tantamount to calibrating the model…
We consider option pricing using a discrete-time Markov switching stochastic volatility with co-jump model, which can model volatility clustering and varying mean-reversion speeds of volatility. For pricing European options, we develop a…
We investigate the problem of pricing derivatives under a fractional stochastic volatility model. We obtain an approximate expression of the derivative price where the stochastic volatility can be composed of deterministic functions of time…
Signature methods have been widely and effectively used as a tool for feature extraction in statistical learning methods, notably in mathematical finance. They lack, however, interpretability: in the general case, it is unclear why…
In this paper, we derive closed-form formulas of first-order approximation for down-and-out barrier and floating strike lookback put option prices under a stochastic volatility model, by using an asymptotic approach. To find the explicit…
Stochastic volatility (SV) and local stochastic volatility (LSV) processes can be used to model the evolution of various financial variables such as FX rates, stock prices, and so on. Considerable efforts have been devoted to pricing…
Oil markets profoundly influence world economies through determination of prices of energy and transports. Using novel methodology devised in frequency domain, we study the information transmission mechanisms in oil-based commodity markets.…
One of the shortcomings of the Black and Scholes model on option pricing is the assumption that trading of the underlying asset does not affect the price of that asset. This assumption can be fulfilled only in perfectly liquid markets.…
We introduce a simple stochastic volatility model, whose novelty consists in taking into account hitting times of the asset price, and study the optimal stopping problem corresponding to a put option whose time horizon (after the asset…
Option pricing is the most elemental challenge of mathematical finance. Knowledge of the prices of options at every strike is equivalent to knowing the entire pricing distribution for a security, as derivatives contingent on the security…
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…
We propose a hedging approach for general contingent claims when liquidity is a concern and trading is subject to transaction cost. Multiple assets with different liquidity levels are available for hedging. Our risk criterion targets a…
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…