Related papers: Pricing Energy Contracts under Regime Switching Ti…
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…
Modern market management systems continue to evolve due to the intentions to improve system security and reliability. This evolvement has been leading to a transition of market auction models from a deterministic structure with…
In this paper, we consider a discrete time economy where we assume that the short term interest rate follows a quadratic term structure of a regime switching asset process. The possible non-linear structure and the fact that the interest…
This paper introduces the class of volatility modulated L\'{e}vy-driven Volterra (VMLV) processes and their important subclass of L\'{e}vy semistationary (LSS) processes as a new framework for modelling energy spot prices. The main…
The problem of European-style option pricing in time-changed L\'{e}vy models in the presence of compound Poisson jumps is considered. These jumps relate to sudden large drops in stock prices induced by political or economical hits. As the…
In this paper we study dynamic pricing mechanisms of financial derivatives. A typical model of such pricing mechanism is the so-called g--expectation defined by solutions of a backward stochastic differential equation with g as its…
The purpose of this paper is to analyze the problem of option pricing when the short rate follows subdiffusive fractional Merton model. We incorporate the stochastic nature of the short rate in our option valuation model and derive explicit…
This paper introduces a new type of risk measures, namely regime switching entropic risk measures, and study their applicability through simulations. The state of the economy is incorporated into the entropic risk formulation by using a…
Markov switching models (MSMs) are probabilistic models that employ multiple sets of parameters to describe different dynamic regimes that a time series may exhibit at different periods of time. The switching mechanism between regimes is…
This paper deals with optimal prediction in a regime-switching model driven by a continuous-time Markov chain. We extend existing results for geometric Brownian motion by deriving optimal stopping strategies that depend on the current…
Based on the concept of self-decomposability, we extend some recent multivariate L\'evy models built using multivariate subordination with the aim of capturing situations in which a sudden event in one market is propagated onto related…
The information-based asset-pricing framework of Brody, Hughston and Macrina (BHM) is extended to include a wider class of models for market information. In the BHM framework, each asset is associated with a collection of random cash flows.…
We propose a very efficient method for pricing various types of lookback options under Markov models. We utilize the model-free representations of lookback option prices as integrals of first passage probabilities. We combine efficient…
We introduce a class of randomly time-changed fast mean-reverting stochastic volatility models and, using spectral theory and singular perturbation techniques, we derive an approximation for the prices of European options in this setting.…
We investigate methods for pricing American options under the variance gamma model. The variance gamma process is a pure jump process which is constructed by replacing the calendar time by the gamma time in a Brownian motion with drift,…
In electricity markets, futures contracts typically function as a swap since they deliver the underlying over a period of time. In this paper, we introduce a market price for the delivery periods of electricity swaps, thereby opening an…
In [1], a single-period co-optimization model of energy and reserve is considered to better illustrate the properties of the co-optimization model and the associated market mechanism. To make the discussion more general, in this paper, the…
In response to the increasing deployment of battery storage systems for cost reduction and grid stress mitigation, this study presents the development of a new real-time Markov decision process model to efficiently schedule battery systems…
This paper studies the continuous-time reinforcement learning (RL) for optimal switching problems across multiple regimes. We consider a type of exploratory formulation under entropy regularization where the agent randomizes both the timing…
A nonlinear wave alternative for the standard Black-Scholes option-pricing model is presented. The adaptive-wave model, representing 'controlled Brownian behavior' of financial markets, is formally defined by adaptive nonlinear…