## Search

Now showing items 1-46 of 46

(Research report / Forskningsrapport, 2013)

We propose a finite difference scheme to simulate solutions to a certain type of hyperbolic stochastic partial differential equation (SPDE). These solutions can in turn estimate so called volatility modulated Volterra (VMV) ...

(Research report / Forskningsrapport, 2013)

The present paper discusses Levy semistationary processes in the context of power markets. A Fourier simulation scheme for obtaining trajectories of these processes is discussed and its rate of convergence is analysed. ...

(Research report / Forskningsrapport, 2012)

We study the pricing of spread options. We consider a bivariate jump-diffusion model for the price process and we obtain a Margrabe type formula for the evaluation of the spread option. Moreover, we consider models in which ...

(Research report / Forskningsrapport, 2011)

Merton's classical portfolio optimisation problem for an investor, who can trade in a risk-free bond and a stock, can be extended to the case where the driving noise of the log-returns is a pure jump process instead of a ...

(Research report / Forskningsrapport, 2011)

The aim of this paper is to study pricing of weather insurance contracts based on temperature indices. Three different pricing methods are analysed: the classical burn approach, index modelling and temperature modelling. ...

(Research report / Forskningsrapport, 2010)

We study the robustness of option prices to model variation within a jump-diffusion framework. In particular we consider models in which the small variations in price dynamics are modeled with a Poisson random measure with ...

(Research report / Forskningsrapport, 2010)

We study the robustness of option prices to model variation after a change of measure where the measure depends on the model choice. We consider geometric Lévy models in which the infinite activity of the small jumps is ...

(Research report / Forskningsrapport, 2010)

We study the computation of the Greeks of options written on assets modelled by a multi-factor dynamics. For this purpose, we apply the conditional density method in which the knowledge of the density of one factor is ...

(Research report / Forskningsrapport, 2009)

Spot prices in energy markets exhibit special features like price spikes, mean-reversion inverse, stochastic volatility, inverse leverage effect and co-integration between the different commodities. In this paper a ...

(Research report / Forskningsrapport, 2009)

A great challenge using the traditional regression based Bermuda option valuation based on Longstaff and Schwartz (LS) (see Longstaff and Schwartz [10]) is the stability of solutions for different basis functions. In this ...

(Research report / Forskningsrapport, 2009)

We study the robustness of the sensitivity with respect to parameters in expectation functionals with respect to various approximations of a Lévy process. As sensitivity parameter, we focus on the delta of an European ...

(Research report / Forskningsrapport, 2008)

The main objective of this work is to construct optimal temperature futures from available market-traded contracts to hedge spatial risk. Temperature dynamics are modelled by a stochastic differential equation with spatial ...

(Research report / Forskningsrapport, 2008)

In this paper we study the approximation of a sum of assets having marginal logreturns being multivariate normal inverse Gaussian distributed. We analyse the choice of a univariate exponential NIG distribution, where the ...

(Research report / Forskningsrapport, 2008)

Electricity is a commodity which is non-storable, and therefore difficult to move forward in time. Hence, forward looking information about market conditions is not necessarily incorporated in today's prices, and the typical ...

(Research report / Forskningsrapport, 2007)

In this paper we develop a model for electricity spot price dynamics. The spot price is assumed to follow an exponential Ornstein-Uhlenbeck (OU) process with an added compound Poisson process, therefore the model allows ...

(Research report / Forskningsrapport, 2007)

We derive derivative-free formulas for the delta and other Greeks of options written on an asset modeled by a geometric Brownian motion with stochastic volatility of Barndorff-Nielsen and Shephard type. The method applies ...

(Research report / Forskningsrapport, 2007)

In recent decades, there has been a growing interest for utility indifference based approaches to solve the question of pricing of derivatives in incomplete markets. In this paper we consider a stochastic volatility model ...

(Research report / Forskningsrapport, 2006)

We propose a non-symmetric copula to model the evolution of electricity and gas prices by a bivariate non-Gaussian Ornstein- Uhlenbeck pure jump process. We identify the marginal processes as driven by normal inverse ...

(Research report / Forskningsrapport, 2006)

Following the increasing awareness of the risk from volatility fluctuations the markets for hedging contracts written on realised volatility has surged. Companies looking for means to secure against unexpected accumulation ...

(Research report / Forskningsrapport, 2005)

We propose a quasi-Monte Carlo (qMC) algorithm to simulate variates from the normal inverse Gaussian (NIG) distribution. The algorithm is based on a Monte Carlo technique found in the Rydberg reference, and is based on ...

(Research report / Forskningsrapport, 2005)

We discuss the modeling of electricity contracts traded in many deregulated power markets. These forward/futures type contracts deliver (either physically or financially) electricity over a specified time period, and is ...

(Research report / Forskningsrapport, 2005)

We develop and apply a numerical scheme for pricing options for the stochastic volatility model proposed by Barndorff-Nielsen and Shephard. This non-Gaussian Ornstein-Uhlenbeck type of volatility model gives rise to an ...

(Research report / Forskningsrapport, 2005)

This paper presents an analytic approximation for the pricing dynamics of spark spread options in terms of Fourier transforms. We propose to model the spark spread, that is, the price difference of electricity and gas, ...

(Research report / Forskningsrapport, 2005)

We propose an mean-reverting model for the spot price dynamics of electricity which includes seasonality of the prices and spikes. The dynamics is a sum of non-Gaussian Ornstein-Uhlenbeck processes with jump processes ...

(Research report / Forskningsrapport, 2005)

We propose a spatial-temporal stochastic model for daily average temperature data. First we build a model for a single spatial location, independently on the spatial information. The model includes trend, seasonality and ...

(Research report / Forskningsrapport, 2005)

We propose an Ornstein-Uhlenbeck process with seasonal volatility to model the time dynamics of daily average temperatures. The model is fitted to almost 43 years of daily observations recorded in Stockholm, one of the ...

ARBITRAGE-FREE PRICING DYNAMICS OF INTEREST-RATE GUARANTEES BASED ON THE UTILITY INDIFFERENCE METHOD

(Research report / Forskningsrapport, 2005)

We consider the problem of utility indifference pricing of a put option written on a non-tradeable asset, where we can hedge in a correlated asset. The dynamics are assumed to be a two-dimensional geometric Brownian motion, ...

(Research report / Forskningsrapport, 2004)

We use the dynamic programming approach to derive an equation for the utility indifference price of Markovian claims in a stochastic volatility model proposed by Barndorff-Nielsen and Shephard (2001). The pricing equation ...

(Research report / Forskningsrapport, 2004)

We model the daily average temperature variations with a mean-reverting Ornstein-Uhlenbeck process driven by generalized hyperbolic Lévy process and having seasonal mean and volatility. It is emirically demonstrated that ...

(Research report / Forskningsrapport, 2004)

We analyze the classical Merton's portfolio optimization problem when the risky asset follows an exponential Ornstein-Uhlenbeck process, also known as the Schwartz mean-reversion dynamics. The corresponding Hamilton-Jacobi-Bellman ...

(Research report / Forskningsrapport, 2003)

Under general conditions stated in Rheinländer 30], we prove that in a stochastic volatility market the Radon-Nikodym density of the minimal entropy martingale measure can be expressed in terms of the solution of a semilinear ...

(Research report / Forskningsrapport, 2003)

We derive arbitrage-free pricing dynamics for claims on temperature, where the temperature follows a fractional Ornstein-Uhlenbeck process. Using a fractional white noise calculus, we can express the dynamics as a special ...

(Research report / Forskningsrapport, 2003)

We model spot prices in energy markets with exponential non-Gaussian Ornstein-Uhlenbeck processes. We generalize the classical geometric Brownian motion and Schwartz' mean-reversion model by introducing Lévy processes as ...

(Research report / Forskningsrapport, 2002)

In this paper we investigate the recently introduced Malliavin approach compared to more classical approaches to find sensitivities of options in commodity and energy markets. The Malliavin approach has been developed in ...

(Research report / Forskningsrapport, 2002)

We develop an anticipative calculus for Lévy processes with finite second moment. The calculus is based on the chaos expansion of square-integrable random variables in terms of iterated integrals of the compensated Poisson ...

(Research report / Forskningsrapport, 2001)

In a market driven by a Lévy martingale, we consider a claim x. We study the problem of minimal variance hedging and we give an explicit formula for the minimal variance portfolio in terms of Malliavin derivatives. We ...

(Research report / Forskningsrapport, 2000)

(Research report / Forskningsrapport, 2000)

(Research report / Forskningsrapport, 2000)

(Research report / Forskningsrapport, 1996)

(Research report / Forskningsrapport, 1996)

(Research report / Forskningsrapport, 1995)

(Research report / Forskningsrapport, 1995)

(Research report / Forskningsrapport, 1995)

(Research report / Forskningsrapport, 1993)

(Research report / Forskningsrapport, 1993)