We present a new model for pricing electricity swaps. Two general factors affect all contracts but unique risk factors affect each contract. General factors are average swap prices and deterministic trend-seasonal components, and unique factors are forward premiums. Innovations follow MNIG...

I document a sizeable bias that might arise when valuing out of the money American options via the Least Square Method proposed by Longstaff and Schwartz (2001). The key point of this algorithm is the regression-based estimate of the continuation value of an American option. If this regression...

In electricity markets, futures contracts typically function as a swap since they deliver the underlying over a period of time. In this paper, we introduce a market price for the delivery periods of electricity swaps, thereby opening an arbitrage-free pricing framework for derivatives based on...

The mechanism behind price formation in electricity futures markets is still under discussion. Theory suggests that hedging pressure caused by deviating risk preferences is the most promising approach. This paper contributes to this discussion through an empirical investigation of electricity...

The mechanism behind price formation in electricity futures markets is still under discussion. Theory suggests that hedging pressure caused by deviating risk preferences is the most promising approach. This paper contributes to this discussion through an empirical investigation of electricity...

We examine the impact of interest rates benchmark reform and upcoming Libor transition on options markets. We address various modelling challenges the transition brings. We specifically focus on the impact of the clearing houses' discounting switch on swaptions, and the consequences of Libor...

The market for ultra short-term (zero days-to-expiry or 0DTE) options has grown exponentially over the last few years. In 2023, daily volume in 0DTEs reached over 45% of overall daily options volume. After briefly describing this exploding new market, we present a novel pricing formula designed...

One of the main purposes to use the futures products in commodity markets is to fill the hedging needs for relatively large market risk and counterparty risk in commodity spot markets. We believe that these two types of market and credit risk will be incorporated into the commodity futures...

Increasing interconnectivity between electricity wholesale markets requires an efficient allocation scheme in order to provide access to scarce cross-border transmission capacities. The explicit schemes have primarily induced economically inefficient interconnector use given that flows have to...

In order to increase overall transparency on key operational information, power transmission system operators publish an increasing amount of fundamental data, including forecasts of electricity demand and available capacity. We develop a fundamental model for electricity prices which lends...