Related papers: Perpetual Futures Pricing
This paper introduces an information-based model for the pricing of storable commodities such as crude oil and natural gas. The model uses the concept of market information about future supply and demand as a basis for valuation. Physical…
We introduce a fairly general, recombining trinomial tree model in the natural world. Market-completeness is ensured by considering a market consisting of two risky assets, a riskless asset, and a European option. The two risky assets…
We study the pricing of European-style options written on forward contracts within function-valued infinite-dimensional affine stochastic volatility models. The dynamics of the underlying forward price curves are modeled within the…
We obtain option pricing formulas for stock price models in which the drift and volatility terms are functionals of a continuous history of the stock prices. That is, the stock dynamics follows a nonlinear stochastic functional differential…
A variance swap is a derivative with a path-dependent payoff which allows investors to take positions on the future variability of an asset. In the idealised setting of a continuously monitored variance swap written on an asset with…
An eternally inflating universe produces an infinite amount of spatial volume, so every possible event happens an infinite number of times, and it is impossible to define probabilities in terms of frequencies. This problem is usually…
The European Power Exchange has introduced day-ahead auctions and continuous trading spot markets to facilitate the insertion of renewable electricity. These markets are designed to balance excess or lack of power in short time periods,…
We construct a no-arbitrage model of bond prices where the long bond is used as a numeraire. We develop bond prices and their dynamics without developing any model for the spot rate or forward rates. The model is arbitrage free and all…
In this study, we consider the asset pricing under model uncertainty with discrete time and states structure. For the single-period securities model, we give a novel definition of arbitrage under a family of probability, and explore of its…
In discrete time markets with proportional transaction costs, Schachermayer (2004) shows that robust no-arbitrage is equivalent to the existence of a strictly consistent price system. In this paper, we introduce the concept of prospective…
We present an empirical argument against the existence of single timeline backward time travel using the price behavior of prediction markets. If rational agents could travel backward in time, binary prediction contracts would converge to…
A stochastic model for pure-jump diffusion (the compound renewal process) can be used as a zero-order approximation and as a phenomenological description of tick-by-tick price fluctuations. This leads to an exact and explicit general…
This paper examines the determinants of the volatility of futures prices and basis for three commodities: gold, oil and bitcoin -- often dubbed solid, liquid and digital gold -- by using contract-by-contract analysis which has been…
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…
Leveraging a unique dataset of carbon futures option prices traded on the ICE market from December 2015 until December 2020, we present the results from an unprecedented calibration exercise. Within a multifactor stochastic volatility…
Recent literature seek to forecast implied volatility derived from equity, index, foreign exchange, and interest rate options using latent factor and parametric frameworks. Motivated by increased public attention borne out of the…
Reliability Options are capacity remuneration mechanisms aimed at enhancing security of supply in electricity systems. They can be framed as call options on electricity sold by power producers to System Operators. This paper provides a…
We consider a general local-stochastic volatility model and an investor with exponential utility. For a European-style contingent claim, whose payoff may depend on either a traded or non-traded asset, we derive an explicit approximation for…
Signature methods have been widely and effectively used as a tool for feature extraction in statistical learning methods, notably in mathematical finance. They lack, however, interpretability: in the general case, it is unclear why…
In this article we present a new approach to the numerical valuation of derivative securities. The method is based on our previous work where we formulated the theory of pricing in terms of tradables. The basic idea is to fit a finite…