In this paper, we present our study on a hybrid stochastic volatility model incorporating local volatility for pricing options in the foreign exchange (FX) market. The hybrid stochastic-local volatility model (SLV) could match the implied volatility surface well and meanwhile shows the...

In northern Europe wind energy has become a dominating renewable energy source due to natural conditions and national support schemes. However, the uncertainty about wind generation affects existing network infrastructure and power production planning of generators and cannot not be fully...

In northern Europe wind energy has become a dominating renewable energy source due to natural conditions and national support schemes. However, the uncertainty about wind generation affects existing network infrastructure and power production planning of generators and cannot not be fully...

We consider an electricity market organized with two settlements: one for a pre-delivery (day-ahead) market and one for real time, where uncertainty regarding production from non-dispatchable energy sources as well as variable load is resolved in the latter stage. We formulate two models to...

In northern Europe wind energy became a dominating renewable energy source due to natural conditions and national support schemes. However, the uncertainty about wind generation affects existing network infrastructure and power production planning of generators and cannot not be fully diminished...

The standard Ricardian model of competition has a fixed number of firms, each with limited capacity and differential exogenous costs or qualities. In this paper, we introduce a real entry process by formulating a multistage Ricardian equilibrium model with free entry and stochastic product...

This article presents an electricity dispatch model with endogenous electricity generation capacity expansion for Germany over the horizon 2010-2035. The target is to quantify how fuel and carbon price risk impacts investment incentives of thermal power plants. Results point to findings which...

We present a theory of homogeneous volatility bridge estimators for log-price stochastic processes. The main tool of our theory is the parsimonious encoding of the information contained in the open, high and low prices of incomplete bridge, corresponding to given log-price stochastic process,...

Using the Gartner-Ellis theorem from large deviation theory, we characterize the leading-order behaviour of call option prices under the Heston model, in a new regime where the maturity is large and the log-moneyness is also proportional to the maturity. Using this result, we then derive the...

We show that if the discounted Stock price process is a continuous martingale, then there is a simple relationship linking the variance of the terminal Stock price and the variance of its arithmetic average. We use this to establish a model-independent upper bound for the price of a continuously...