Spot option prices, forwards and options on forwards relevant for the commodity markets are computed when the underlying process S is modelled as an exponential of a process xi with memory as, e.g., a Volterra equation driven by a Levy process. Moreover, the interest rate and a risk premium rho...

We model the logarithm of the spot price of electricity with a normal inverse Gaussian (NIG) process and the wind speed and wind power production with two Ornstein–Uhlenbeck processes. In order to reproduce the correlation between the spot price and the wind power production, namely between a...

Weather derivatives (WD) are different from most financial derivatives because the underlying weather cannot be traded and therefore cannot be replicated by other financial instruments. The market price of risk (MPR) is an important parameter of the associated equivalent martingale measures used...

These Proceedings offer a selection of peer-reviewed research and survey papers by some of the foremost international researchers in the fields of finance, energy, stochastics and risk, who present their latest findings on topical problems. The papers cover the areas of stochastic modeling in...

We derive the price of a spread option based on two assets which follow a bivariate volatility modulated Volterra process dynamics. Such a price dynamics is particularly relevant in energy markets, modelling for example the spot price of power and gas. Volatility modulated Volterra processes are...