Related papers: Pricing commodity swing options
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…
Assuming that price of the underlying stock is moving in range bound, the Black-Scholes formula for options pricing supports a separation of variables. The resulting time-independent equation is solved employing different behavior of the…
Global oil price is an important factor in determining many economic variables in the world's economy. It is generally modeled as a stochastic process and have been studied through different techniques by comparing the historic time series…
We study historical calibration of one- and two-factor models that are known to describe relatively well the dynamics of energy underlyings such as spot and index natural gas or oil prices at different physical locations or regional power…
This paper investigates how realized and option implied volatilities are related to the future quantiles of commodity returns. Whereas realized volatility measures ex-post uncertainty, volatility implied by option prices reveals the…
Employing probabilistic techniques we compute best possible upper and lower bounds on the price of an option on one or two assets with continuous piecewise linear payoff function based on prices of simple call options of possibly distinct…
We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…
For a commodity spot price dynamics given by an Ornstein-Uhlenbeck process with Barndorff-Nielsen and Shephard stochastic volatility, we price forwards using a class of pricing measures that simultaneously allow for change of level and…
In this paper, we propose an equilibrium pricing model in a dynamic multi-period stochastic framework with uncertain income streams. In an incomplete market, there exist two traded risky assets (e.g. stock/commodity and weather derivative)…
The pricing of derivatives tied to baskets of assets demands a sophisticated framework that aligns with the available market information to capture the intricate non-linear dependency structure among the assets. We describe the dynamics of…
We propose stochastic control policies to cope with uncertain and variable gas extractions in natural gas networks. Given historical gas extraction data, these policies are optimized to produce the real-time control inputs for nodal gas…
Weighted Monte Carlo prices exotic options calibrating the probabilities of previously generated paths by a regular Monte Carlo to fit a set of option premiums. When only vanilla call and put options and forward prices are considered, the…
In this article we consider combinatorial markets with valuations only for singletons and pairs of buy/sell-orders for swapping two items in equal quantity. We provide an algorithm that permits polynomial time market-clearing and -pricing.…
This paper considers utility indifference valuation of derivatives under model uncertainty and trading constraints, where the utility is formulated as an additive stochastic differential utility of both intertemporal consumption and…
We examine a general multi-factor model for commodity spot prices and futures valuation. We extend the multi-factor long-short model in Schwartz and Smith (2000) and Yan (2002) in two important aspects: firstly we allow for both the long…
This paper addresses the challenges faced in large-volume trading, where executing substantial orders can result in significant market impact and slippage. To mitigate these effects, this study proposes a volatility-volume-based order…
This article presents a generic hybrid numerical method to price a wide range of options on one or several assets, as well as assets with stochastic drift or volatility. In particular for equity and interest rate hybrid with local…
Based on the existing literature, this article presents the different ways of choosing the parameters of stochastic volatility models in general, in the context of pricing financial derivative contracts. This includes the use of stochastic…
Option pricing formulas are derived from a non-Gaussian model of stock returns. Fluctuations are assumed to evolve according to a nonlinear Fokker-Planck equation which maximizes the Tsallis nonextensive entropy of index $q$. A generalized…
This paper considers options pricing when the assumption of normality is replaced with that of the symmetry of the underlying distribution. Such a market affords many equivalent martingale measures (EMM). However we argue (as in the…