Related papers: Pricing energy spread options with variance gamma-…
Based on the concept of self-decomposable random variables we discuss the application of a model for a pair of dependent Poisson processes to energy facilities. Due to the resulting structure of the jump events we can see the…
One of the peculiarities of power and gas markets is the delivery mechanism of forward contracts. The seller of a futures contract commits to deliver, say, power, over a certain period, while the classical forward is a financial agreement…
Kramkov and Sirbu (2006, 2007) have shown that first-order approximations of power utility-based prices and hedging strategies can be computed by solving a mean-variance hedging problem under a specific equivalent martingale measure and…
We consider a price-maker company which generates electricity and sells it in the spot market. The company can increase its level of installed power by irreversible installations of solar panels. In absence of the company's economic…
In this paper, we show that the price of an European call option, whose underlying asset price is driven by the space-time fractional diffusion, can be expressed in terms of rapidly convergent double-series. The series formula can be…
In this paper we derive semi-closed form prices of barrier (perhaps, time-dependent) options for the Hull-White model, ie., where the underlying follows a time-dependent OU process with a mean-reverting drift. Our approach is similar to…
Motivated by empirical evidence from the joint behavior of realized volatility time series, we propose to model the joint dynamics of log-volatilities using a multivariate fractional Ornstein-Uhlenbeck process. This model is a multivariate…
We consider a fractional Ornstein-Uhlenbeck process involving a stochastic forcing term in the drift, as a solution of a linear stochastic differential equation driven by a fractional Brownian motion. For such process we specify mean and…
We provide series expansions for the tempered stable densities and for the price of European-style contracts in the exponential L\'evy model driven by the tempered stable process. These formulas recover several popular option pricing…
European options can be priced by solving parabolic partial(-integro) differential equations under stochastic volatility and jump-diffusion models like Heston, Merton, and Bates models. American option prices can be obtained by solving…
Securing necessary resources for edge computing processes via effective resource trading becomes a critical technique in supporting computation-intensive mobile applications. Conventional onsite spot trading could facilitate this paradigm…
We consider a novel use case for the Double Heston model (Christoffersen et al,, 2009), where the two Heston sub-variances have different spot/volatility correlations but the same volatility of volatility and mean reversion speed. This…
In the first part of this thesis, we focus on American options in the Heston model. We first give an analytical characterization of the value function of an American option as the unique solution of the associated (degenerate) parabolic…
In this paper we propose a new method for probabilistic forecasting of electricity prices. It is based on averaging point forecasts from different models combined with expectile regression. We show that deriving the predicted distribution…
In this paper a simple model for the evolution of the forward density of the future value of an asset is proposed. The model allows for a straightforward initial calibration to option prices and has dynamics that are consistent with…
We study the full distribution of $A=\int_{0}^{T}x^{n}\left(t\right)dt$, $n=1,2,\dots$, where $x\left(t\right)$ is an Ornstein-Uhlenbeck process. We find that for $n>2$ the long-time ($T \to \infty$) scaling form of the distribution is of…
We introduce an extended version of the fractional Ornstein-Uhlenbeck (FOU) process where the integrand is replaced by the exponential of an independent L\'evy process. We call the process the generalized fractional Ornstein-Uhlenbeck…
Mixed quantum-classical methods, such as surface hopping and Ehrenfest dynamics, have proven useful for describing molecular processes involving multiple electronic states. These methods require propagating many independent trajectories,…
The main objective of this paper is to present an algorithm of pricing perpetual American put options with asset-dependent discounting. The value function of such an instrument can be described as \begin{equation*}…
Electricity price forecasting is a critical tool for the efficient operation of power systems and for supporting informed decision-making by market participants. This paper explores a novel methodology aimed at improving the accuracy of…