Related papers: A multi-factor model for improved commodity pricin…

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 present a stochastic-local volatility model for derivative contracts on commodity futures able to describe forward-curve and smile dynamics with a fast calibration to liquid market quotes. A parsimonious parametrization is introduced to…

We determine forest lease value and optimal harvesting strategies under model parameter uncertainty within stochastic bio-economic models that account for catastrophe risk. Catastrophic events are modeled as a Poisson point process, with a…

We price European-style options written on forward contracts in a commodity market, which we model with an infinite-dimensional Heath-Jarrow-Morton (HJM) approach. For this purpose we introduce a new class of state-dependent volatility…

We analyze the VIX futures market with a focus on the exchange-traded notes written on such contracts, in particular we investigate the VXX notes tracking the short-end part of the futures term structure. Inspired by recent developments in…

This paper covers a massive acceleration of Monte-Carlo based pricing method for financial products and financial derivatives. The method is applicable in risk management settings, where a financial product has to be priced under a number…

In the option valuation literature, the shortcomings of one factor stochastic volatility models have traditionally been addressed by adding jumps to the stock price process. An alternate approach in the context of option pricing and…

Time variation and persistence are crucial properties of volatility that are often studied separately in energy volatility forecasting models. Here, we propose a novel approach that allows shocks with heterogeneous persistence to vary…

We develop cointegration for multivariate continuous-time stochastic processes, both in finite and infinite dimension. Our definition and analysis are based on factor processes and operators mapping to the space of prices and cointegration.…

The paper develops a typical management problem of a large power producer (i.e., he can partly influence the market price). In particular, he routinely needs to decide how much of his generation it is preferable to commit to fixed price…

In this paper, we price European Call three different option pricing models, where the volatility is dynamically changing i.e. non constant. In stochastic volatility (SV) models for option pricing a closed form approximation technique is…

This paper aims to examine whether the global economic policy uncertainty (GEPU) and uncertainty changes have different impacts on crude oil futures volatility. We establish single-factor and two-factor models under the GARCH-MIDAS…

We study factor models augmented by observed covariates that have explanatory powers on the unknown factors. In financial factor models, the unknown factors can be reasonably well explained by a few observable proxies, such as the…

The Nelson-Siegel framework is employed to model the term structure of commodity futures prices. Exploiting the information embedded in the level, slope and curvature parameters, we develop novel investment strategies that assume short-term…

This study aims to use simultaneous quantile regression (SQR) to examine the impact of macroeconomic and financial uncertainty including global pandemic, geopolitical risk on the futures returns of crude oil (ROC). The data for this study…

In the complex landscape of traditional futures trading, where vast data and variables like real-time Limit Order Books (LOB) complicate price predictions, we introduce the FutureQuant Transformer model, leveraging attention mechanisms to…

The intricate dynamics of stock markets have led to extensive research on models that are able to effectively explain their inherent complexities. This study leverages the econometrics literature to explore the dynamic factor model as an…

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…

This paper focuses on the valuation and hedging of gas storage facilities, using a spot-based valuation framework coupled with a financial hedging strategy implemented with futures contracts. The first novelty consist in proposing a model…

The market practice of extrapolating different term structures from different instruments lacks a rigorous justification in terms of cash flows structure and market observables. In this paper, we integrate our previous consistent theory for…