Objective of this paper is to gain insights into jump occurrences and to enhance the understanding of modelling jumps in electricity markets. We provide a common modelling framework that allows to incorporate the main jump patterns observed in electricity spot prices and compare the...

One of the shortcomings of the Black and Scholes model on option pricing is the assumption that trading of the underlying asset does not affect the price of that asset. This asumption can be fulfilled only in perfectly liquid markets. Since most markets are illqiud, this asumption might be too...

This paper uses real options theory to value an investment opportunity known as the Mediterranean-Dead Sea hydroelectric project. We employ a discrete time model to:-quantify simultaneous variation of three decision variables over the useful life of the project;-value options to: postpone the...

I investigate whether the volatility risk premium is negative in energy and equity markets by examining the statistical properties of delta-gamma hedged option portfolios (selling the option, hedging with the underlying contract, and correcting for tracking error with an additional option). By...

I investigate whether the volatility risk premium is negative in energy and equity markets by examining the statistical properties of delta-gamma hedged option portfolios (selling the option, hedging with the underlying contract, and correcting for tracking error with an additional option). By...

In this paper I attempt to estimate the risk premiums in energy markets using the closing prices from futures and options contracts of natural gas. Solving for the instantaneous parameters is conducted over several parametric models where the results suggest a model that incorporates both return...

We propose a model where wholesale electricity prices are explained by two state variables: demand and capacity. We derive analytical expressions to price forward contracts and to calculate the forward premium. We apply our model to the PJM, England and Wales, and Nord Pool markets. Our...

In this paper we demonstrate the need for a negative market price of volatility risk to recover the difference between Black-Scholes (1973)/Black (1976) implied volatility and realized term volatility. Initially, using quasi-Monte Carlo simulation, we demonstrate numerically that a negative...

Using the prices of crude oil futures contracts, we construct the term structure of crude oil convenience yields out to one-year maturity. The crude oil convenience yield can be interpreted as the interest rate, denominated in barrels of oil, for borrowing a single barrel of oil, and it measures...