This paper studies a resource extraction problem with capacity constraints, expansion options and stochastic demand process. The producer has to decide on the optimal rate of extraction and the optimal time to build further capacity simultaneously. Using numerical methods to solve the problem,...

We show that incorporating endogenously-determined structural breaks into an asymmetric GARCH model reduces volatility persistence in Bitcoin prices. We find that both good news and bad news have less impact on volatility if structural breaks are incorporated. Hence, our results may indicate...

This paper examines the dynamics of the relationship between the prices of crude oil and of refined products. Theory insinuates some kind of dynamic equilibrium to govern these relations but we suspect that this equilibrium condition may be subject to changes over time. In Brent-based spreads...

We offer a novel approach for solving optimal price adjustment problems, when the underlying process is a Geometric Brownian Motion (GBM) process. Our approach relies on characterizing the cumulative cost of deviation and the cost of adjusting price until the hitting time of the lower or upper...

Machine Learning (ML) is generating new opportunities for innovative research in energy economics and finance. We critically review the burgeoning literature dedicated to Energy Economics/Finance applications of ML. Our review identifies applications in areas such as predicting energy prices...

Over the last decades quota violations have become a norm for OPEC countries. However, the academic literature on OPEC focuses more on its production behavior than on analyzing the quota allocation process or characterizing quota violation patterns. This paper covers a theoretical model with...

The value of digital options (both European and American types) can have an inverse-U shape relationship with the volatility of the underlying process! This seemingly counterintuitive proposition is driven by a particular feature of Maringale processes bounded from below (including both the...

We investigate the maturity-structure of roll strategy returns in the energy futures markets. Our innovation is to report and analyze the risk/return profile, the Sharpe ratio, and the asset pricing loadings of rollover strategies based on futures contracts of the same underlying commodity but...

Using multiple econometrics methods, this paper examines the cointegration and causality relationships between the futures prices of gasoline and the spot prices of two major types of crude oil (i.e. WTI and Brent). The existence of cointegration between prices in adjacent markets, crude oil...

The value of a representative ethanol producer that benefits from both low and high gasoline prices is modeled. Ethanol producers make a modest competitive profit in the mandate-induced region of production. A low price of gasoline increases the demand for blend ethanol and consequently...