Stochastic Weather Generators (SWGs) try to replicate the stochastic patterns of climatological variables characterized by high dimensionality, non-normal probability density functions and non-linear dependence relationships. However, conventional SWGs usually typify weather variables with not...

Pricing option contracts on electricity remains methodologically challenging, with a lack of clearly defined and robust methods. In particular, little is known about pricing options in Brazilian energy markets, despite their economic significance. Using weekly price data (R$/MWh) on four...

Derivatives strategies that aim to earn variance risk premiums are exposed to sharp price declines during market crises, calling into question their suitability for the longterm investor. Our paper defines, analyzes, and proposes potential solutions to three problems (payoff, leverage and finite...