In this paper we introduce an additive two-factor model for electricity futures prices based on Normal Inverse Gaussian Lévy processes, that fulfills a no-overlapping-arbitrage (NOA) condition. We compute European option prices by Fourier transform methods, introduce a specific calibration...

In this paper we introduce an additive two-factor model for electricity futures prices based on Normal Inverse Gaussian Lévy processes, that fulfills a no-overlapping-arbitrage (NOA) condition. We compute European option prices by Fourier transform methods, introduce a specific calibration...

Consider the problem of a central bank that wants to manage the exchange rate between its domestic currency and a foreign one. The central bank can purchase and sell the foreign currency, and each intervention on the exchange market leads to a proportional cost whose instantaneous marginal value...

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 activities, the spot electricity price evolves as an...

We assess the effects of the European Union emission trading scheme (EU ETS) in delivering low-carbon investments at the firm level, by modeling a price taker electricity producer subject to the EU ETS jurisdiction. We compute, via Least Squares Monte Carlo (LSMC) methods, the value of the real...

Reliability Options (ROs) are used to enhance the security of supply in electricity systems. When a power producer writes a RO, s/he agrees to set a cap on the price of electricity that s/he cashes. In return, the system operator, i.e., the party that is buying the option, pays to the option...

In this paper we analyse a market where the risky assets follow defaultable exponential additive processes, with coefficients depending on the default state of the assets. In this market we show that, when an investor wants to maximize a utility function which is logarithmic on both his/her...

We analyze the dependence of future returns on past drawdowns of the monthly time series of the S&P500 index, from 1967 to 2012. From historical data, it appears that when the drawdown increases in absolute value, future returns increase, both in mean as well as in distributional values. We then...

Consider the problem of a central bank that wants to manage the exchange rate between its domestic currency and a foreign one. The central bank can purchase and sell the foreign currency, and each intervention on the exchange market leads to a proportional cost whose instantaneous marginal value...

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 activities, the spot electricity price evolves as an...