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Wholesale electricity markets in many jurisdictions use a two-settlement structure: a day-ahead market for bulk power transactions and a real-time market for fine-grain supply-demand balancing. This paper explores trading demand response…
In a seminal paper in 1973, Black and Scholes argued how expected distributions of stock prices can be used to price options. Their model assumed a directed random motion for the returns and consequently a lognormal distribution of asset…
In two-sided matching markets with contracts, quantile (or generalized median) stable mechanisms represent an interesting class that produces stable allocations which can be viewed as compromises between both sides of the market. These…
We consider arbitrage free valuation of European options in Black-Scholes and Merton markets, where the general structure of the market is known, however the specific parameters are not known. In order to reflect this subjective uncertainty…
We consider a market model that consists of financial investors and producers of a commodity. Producers optionally store some production for future sale and go short on forward contracts to hedge the uncertainty of the future commodity…
We study the interaction between returns and order flow imbalances in the S&P 500 E-mini futures market using a structural VAR model identified through heteroskedasticity. The model is estimated at one-second frequency for each 15-minute…
This paper poses a few fundamental questions regarding the attributes of the volume profile of a Limit Order Books stochastic structure by taking into consideration aspects of intraday and interday statistical features, the impact of…
We study the informational efficiency of a market with a single traded asset. The price initially differs from the fundamental value, about which the agents have noisy private information (which is, on average, correct). A fraction of…
The true probability of a European call option to achieve positive return is investigated under the Black-Scholes model. It is found that the probability is determined by those market factors appearing in the BS formula, besides the growth…
Forecasting accuracy is routinely optimised in financial prediction tasks even though investment and risk-management decisions are executed under transaction costs, market impact, capacity limits, and binding risk constraints. This paper…
We show how text from news articles can be used to predict intraday price movements of financial assets using support vector machines. Multiple kernel learning is used to combine equity returns with text as predictive features to increase…
The paper introduces a limit version of multiple stopping options such that the holder selects dynamically a weight function that control the distribution of the payments (benefits) over time. In applications for commodities and energy…
In financial markets, greater volatility is usually considered synonym of greater risk and instability. However, large market downturns and upturns are often preceded by long periods where price returns exhibit only small fluctuations. To…
We examine two types of binary betting markets, whose primary goal is for profit (such as sports gambling) or to gain information (such as prediction markets). We articulate the interplay between belief and price-setting to analyse both…
This paper assumes that the randomness of market trade values and volumes determines the properties of stochastic market prices. We derive the direct dependence of the first two price statistical moments and price volatility on statistical…
The robust option pricing problem is to find upper and lower bounds on fair prices of financial claims using only the most minimal assumptions. It contrasts with the classical, model-based approach and gained prominence in the wake of the…
Scale-free distributions and correlation functions found in financial data are reminiscent of the scale invariance of physical observables in the vicinity of a critical point. Here, we present empirical evidence for a transition phenomenon,…
Accurate prediction of electricity prices plays an essential role in the electricity market. To reflect the uncertainty of electricity prices, price intervals are predicted. This paper proposes a novel prediction interval construction…
In many areas of engineering and sciences, decision rules and control strategies are usually designed based on nominal values of relevant system parameters. To ensure that a control strategy or decision rule will work properly when the…
Geometry constitutes a core set of intuitions present in all humans, regardless of their language or schooling [1]. Could brain's built in machinery for processing geometric information take part in uncertainty representation? For decades…