Related papers: Pricing commodity swing options
The rising share of volatile renewable generation increases the demand for flexibility in the electricity grid. Flexible capacity can be offered by industrial energy systems through participation on either the continuous intraday,…
In this article we focus on the pricing of exchange options when the dynamic of logprices follows either the well-known variance gamma or the recent variance gamma++ process introduced in Gardini et al [19]. In particular, for the former…
We test whether the futures prices of some commodity and energy markets are determined by stochastic rules or exhibit nonlinear deterministic endogenous fluctuations. As for the methodologies, we use the maximal Lyapunov exponents (MLE) and…
This review presents the set of electricity price models proposed in the literature since the opening of power markets. We focus on price models applied to financial pricing and risk management. We classify these models according to their…
We introduce a Path Shadowing Monte-Carlo method, which provides prediction of future paths, given any generative model. At any given date, it averages future quantities over generated price paths whose past history matches, or `shadows',…
The pricing of options, warrants and other derivative securities is one of the great success of financial economics. These financial products can be modeled and simulated using quantum mechanical instruments based on a Hamiltonian…
In this paper, we propose and study a novel continuous-time model, based on the well-known constant elasticity of variance (CEV) model, to describe the asset price process. The basic idea is that the volatility elasticity of the CEV model…
The energy transition is expected to significantly increase the share of renewable energy sources whose production is intermittent in the electricity mix. Apart from key benefits, this development has the major drawback of generating a…
Volatility clustering, long-range dependence, and non-Gaussian scaling are stylized facts of financial assets dynamics. They are ignored in the Black & Scholes framework, but have a relevant impact on the pricing of options written on…
We study a stochastic control approach to managed futures portfolios. Building on the Schwartz 97 stochastic convenience yield model for commodity prices, we formulate a utility maximization problem for dynamically trading a single-maturity…
This paper proposes to model asset price dynamics with a mixture of diffusion processes where the instantaneous volatility of the underlying diffusion process contains a random vector. The marginal probability distributions of the proposed…
We combine the one-dimensional Monte Carlo simulation and the semi-analytical one-dimensional heat potential method to design an efficient technique for pricing barrier options on assets with correlated stochastic volatility. Our approach…
The pricing of currency options is largely dependent on the dynamic relationship between a pair of currencies. Typically, the pricing of options with payoffs dependent on multi-assets becomes tricky for reasons such as the non-Gaussian…
In a stochastic volatility framework, we find a general pricing equation for the class of payoffs depending on the terminal value of a market asset and its final quadratic variation. This allows a pricing tool for European-style claims…
In this paper, we study the pricing of contracts in fixed income markets under volatility uncertainty in the sense of Knightian uncertainty or model uncertainty. The starting point is an arbitrage-free bond market under volatility…
We consider a method of lines (MOL) approach to determine prices of European and American exchange options when underlying asset prices are modelled with stochastic volatility and jump-diffusion dynamics. As the MOL, as with any other…
This paper presents a comparative analysis of univariate and multivariate GARCH-family models and machine learning algorithms in modeling and forecasting the volatility of major energy commodities: crude oil, gasoline, heating oil, and…
This paper studies the market phenomenon of non-convergence between futures and spot prices in the grains market. We postulate that the positive basis observed at maturity stems from the futures holder's timing options to exercise the…
We introduce a new model of financial market with stochastic volatility driven by an arbitrary H\"older continuous Gaussian Volterra process. The distinguishing feature of the model is the form of the volatility equation which ensures the…
A new method for stochastic control based on neural networks and using randomisation of discrete random variables is proposed and applied to optimal stopping time problems. The method models directly the policy and does not need the…