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The growing integration of renewable energy sources necessitates adequate reserve capacity to maintain power balance. However, in market clearing, power companies with flexible resources may submit strategic bids to maximize profits,…
Option contracts are a type of financial derivative that allow investors to hedge risk and speculate on the variation of an asset's future market price. In short, an option has a particular payout that is based on the market price for an…
In both finance and economics, quantitative models are usually studied as isolated mathematical objects --- most often defined by very strong simplifying assumptions concerning rationality, efficiency and the existence of disequilibrium…
We study the problem faced by a service provider that has to sell services to a user. In our model the service provider proposes various payment options (a menu) to the user which may be based, for example, on the quality of the service.…
We present a unified, market-complete model that integrates both the Bachelier and Black-Scholes-Merton frameworks for asset pricing. The model allows for the study, within a unified framework, of asset pricing in a natural world that…
Pricing decisions are often made when market information is still poor. In turn, existing theoretical models often reason about the response of optimal prices to changing market characteristics without exploiting all available information…
We investigate the relation between the fair price for European-style vanilla options and the distribution of short-term returns on the underlying asset ignoring transaction and other costs. We compute the risk-neutral probability density…
Differential equations can be used to construct predictive models of a diverse set of real-world phenomena like heat transfer, predator-prey interactions, and missile tracking. In our work, we explore one particular application of…
The products of weak values of quantum observables are shown to be of value in deriving quantum uncertainty and complementarity relations, for both weak and strong measurement statistics. First, a 'product representation formula' allows the…
Traditional electric energy markets do not explicitly model generator contingencies. To improve the representation of resources and to enhance the modeling of uncertainty, existing markets are moving in the direction of including generator…
A long noted difficulty when assessing the reliability (or calibration) of forecasting systems is that reliability, in general, is a hypothesis not about a finite dimensional parameter but about an entire functional relationship. A…
The Black-Scholes model gives vanilla Europen call option prices as a function of the volatility. We prove Lipschitz stability in the inverse problem of determining the implied volatility, which is a function of the underlying asset, from a…
This article proposes a calibration framework for complex option pricing models that jointly fits market option prices and the term structure of variance. Calibrated models under the conventional objective function, the sum of squared…
The globalization of the software market leads to crucial problems for software companies. More competition between software companies arises and leads to the force on companies to develop ever newer software products in ever shortened time…
In this article we propose a qualitative (ordinal) counterpart for the Partially Observable Markov Decision Processes model (POMDP) in which the uncertainty, as well as the preferences of the agent, are modeled by possibility distributions.…
Prediction markets are often described as mechanisms that ``aggregate information'' into prices, yet the mapping from dispersed private information to observed market histories is typically noisy, endogenous, and shaped by heterogeneous and…
We study specific nonlinear transformations of the Black-Scholes implied volatility to show remarkable properties of the volatility surface. Model-free bounds on the implied volatility skew are given. Pricing formulas for the European…
Urban food delivery services have become an integral part of daily life, yet their mobility and environmental externalities remain poorly addressed by planners. Most studies neglect whether consumers pay enough to internalize the broader…
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,…
We have recently developed the QTPIE (charge transfer with polarization current equilibration) fluctuating-charge model, a new model with correct dissociation behavior for nonequilibrium geometries. The correct asymptotics originally came…