Related papers: Pricing energy spread options with variance gamma-…
We study the forward price dynamics in commodity markets realized as a process with values in a Hilbert space of absolutely continuous functions defined by Filipovi\'c. The forward dynamics are defined as the mild solution of a certain…
In this work we propose a option pricing model based on the Ornstein-Uhlenbeck process. It is a new look at the Black-Scholes formula which is based on the quantum game theory. We show the differences between a classical look which is price…
Pricing of European basket call option with n-assets and a bond is discussed in this paper, where all prices of n-assets and the bond are driven by Exponential Ornstein-Uhlenbeck processes. The close-form of European basket option pricing…
A Levy-driven Ornstein-Uhlenbeck process is proposed to model the evolution of the risk-free rate and default intensities for the purpose of evaluating option contracts on a credit index. Time evolution in credit markets is assumed to…
When stock prices are observed at high frequencies, more information can be utilized in estimation of parameters of the price process. However, high-frequency data are contaminated by the market microstructure noise which causes significant…
This research proposes a model for the intraday variation between the ETHBTC spot and the quotient of ETHUSDT and BTCUSDT traded on Binance. Under conditions of no-arbitrage, perfect accuracy and no microstructure effects, the variation…
We present a new model for the electricity spot price dynamics, which is able to capture seasonality, low-frequency dynamics and the extreme spikes in the market. Instead of the usual purely deterministic trend we introduce a non-stationary…
This paper studies the problem of trading futures with transaction costs when the underlying spot price is mean-reverting. Specifically, we model the spot dynamics by the Ornstein-Uhlenbeck (OU), Cox-Ingersoll-Ross (CIR), or exponential…
For a commodity spot price dynamics given by an Ornstein-Uhlenbeck process with Barndorff-Nielsen and Shephard stochastic volatility, we price forwards using a class of pricing measures that simultaneously allow for change of level and…
We discuss stochastic modeling of volatility persistence and anti-correlations in electricity spot prices, and for this purpose we present two mean-reverting versions of the multifractal random walk (MRW). In the first model the…
We investigate the problem of pricing derivatives under a fractional stochastic volatility model. We obtain an approximate expression of the derivative price where the stochastic volatility can be composed of deterministic functions of time…
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…
We propose a parsimonious stochastic model for characterising the distributional and temporal properties of rainfall. The model is based on an integrated Ornstein-Uhlenbeck process driven by the Hougaard L\'evy process. We derive properties…
We conduct a preliminary analysis of a pairs trading strategy using the Ornstein-Uhlenbeck (OU) process to model stock price spreads. We compare this approach to a naive pairs trading strategy that uses a rolling window to calculate mean…
This paper explores the concept of random-time subordination in modelling stock-price dynamics, and We first present results on the Laplace distribution as a Gaussian variance-mixture, in particular a more efficient volatility estimation…
A new multi-factor short rate model is presented which is bounded from below by a real-valued function of time. The mean-reverting short rate process is modeled by a sum of pure-jump Ornstein--Uhlenbeck processes such that the related bond…
This paper explores the application and significance of the second-order Esscher pricing model in option pricing and risk management. We split the study into two main parts. First, we focus on the constant jump diffusion (CJD) case,…
The recent liberalization of the electricity and gas markets has resulted in the growth of energy exchanges and modelling problems. In this paper, we modelize jointly gas and electricity spot prices using a mean-reverting model which fits…
In the framework of bilateral Gamma stock models we seek for adequate option pricing measures, which have an economic interpretation and allow numerical calculations of option prices. Our investigations encompass Esscher transforms, minimal…
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…