Related papers: A multi-factor model for improved commodity pricin…
This paper explores the theory behind the rich and robust family of {\alpha}-stable distributions to estimate parameters from financial asset log-returns data. We discuss four-parameter estimation methods including the quantiles,…
Due to major shifts in European energy supply, a structural change can be observed in Austrian electricity spot price data starting from the second quarter of the year 2021 onward. In this work we study the performance of two different…
This paper presents a new model for options pricing. The Black-Scholes-Merton (BSM) model plays an important role in financial options pricing. However, the BSM model assumes that the risk-free interest rate, volatility, and equity premium…
In this paper, we consider a generic interest rate market in the presence of roll-over risk, which generates spreads in spot/forward term rates. We do not require classical absence of arbitrage and rely instead on a minimal market viability…
We derive a new high-order compact finite difference scheme for option pricing in stochastic volatility models. The scheme is fourth-order accurate in space and second-order accurate in time. Under some restrictions, theoretical results…
In this paper, we solve the multiple product price optimization problem under interval uncertainties of the price sensitivity parameters in the demand function. The objective of the price optimization problem is to maximize the overall…
This paper considers utility indifference valuation of derivatives under model uncertainty and trading constraints, where the utility is formulated as an additive stochastic differential utility of both intertemporal consumption and…
Consider the problem of pricing options on forwards in energy markets, when spot prices follow a geometric multi-factor model in which several rates of mean reversion appear. In this paper we investigate the role played by slow mean…
Crude oil is a major component in most advanced economies of the world. Accurately predicting and understanding the behavior of crude oil prices is important for economists, analysts, forecasters, and traders, to name a few. The price of…
We propose a new structural model that can compute the electricity spot and forward prices in two coupled markets with limited interconnection and multiple fuels. We choose a structural approach in order to represent some key…
Have you ever felt miserable because of a sudden whipsaw in the price that triggered an unfortunate trade? In an attempt to remove this noise, technical analysts have used various types of moving averages (simple, exponential, adaptive one…
Based on forward curves modelled as Hilbert-space valued processes, we analyse the pricing of various options relevant in energy markets. In particular, we connect empirical evidence about energy forward prices known from the literature to…
The Heston stochastic volatility model is a standard model for valuing financial derivatives, since it can be calibrated using semi-analytical formulas and captures the most basic structure of the market for financial derivatives with…
Insurers are increasingly adopting more demand-based strategies to incorporate the indirect effect of premium changes on their policyholders' willingness to stay. However, since in practice both insurers' renewal premia and customers'…
We consider a dynamic portfolio optimization problem that incorporates predictable returns, instantaneous transaction costs, price impact, and stochastic volatility, extending the classical results of Garleanu and Pedersen (2013), which…
It is a market practice to express market-implied volatilities in some parametric form. The most popular parametrizations are based on or inspired by an underlying stochastic model, like the Heston model (SVI method) or the SABR model (SABR…
The scarcity of task-labeled time-series benchmarks in the financial domain hinders progress in continual learning. Addressing this deficit would foster innovation in this area. Therefore, we present COB, Crude Oil Benchmark datasets. COB…
We explore the effect of past market movements on the instantaneous correlations between assets within the futures market. Quantifying this effect is of interest to estimate and manage the risk associated to portfolios of futures in a…
We develop a novel filtering and estimation procedure for parametric option pricing models driven by general affine jump-diffusions. Our procedure is based on the comparison between an option-implied, model-free representation of the…
We present tight bounds and heuristics for personalized, multi-product pricing problems. Under mild conditions we show that the best price in the direction of a positive vector results in profits that are guaranteed to be at least as large…