In this paper we present a mean-reverting jump diffusion model for the electricity spot price. We obtain a closed-form solution for forward contracts and calibrate it to market data from England and Wales. Finally, based on the calibrated forward curve we present months, quarters, and...

This paper presents a mean-reverting jump diffusion model for the electricity spot price and derives the corresponding forward price in closed-form. Based on historical spot data and forward data from England and Wales the model is calibrated and months, quarters, and seasons-ahead forward...

We present a spot price model for wholesale electricity prices which incorporates forward looking information that is available to all market players. We focus on information that measures the extent to which the capacity of the England and Wales generation park will be constrained over the next...

We show how to calculate European-style option prices when the log-stock price process follows a Levy-Stable process with index parameter 1 ≤ α ≤ 2 and skewness parameter -1 ≤ β ≤ 1. Key to our result is to model integrated variance  [image omitted] as an increasing Levy-Stable...

In this paper we show how to calculate European-style option prices when the log-stock and stock returns processes follow a symmetric Levy-Stable process. We extend our results to price European-style options when the log-stock process follows a skewed Levy-Stable process.

The contribution of this paper is two-fold. First we show how to estimate the volatility of high frequency log-returns where the estimates are not a affected by microstructure noise and the presence of Lévy-type jumps in prices. The second contribution focuses on the relationship between the...

In this paper we derive analytic expressions for the value of European Put and Call options when the stock process follows an exponential Levy-Stable process. It is shown that the generalised Black-Scholes operator for the Levy-Stable case can be obtained as an asymptotic approximation of a...

Using high frequency data for the price dynamics of equities we measure the impact that market microstructure noise has on estimates of the: (i) volatility of returns; and (ii) variance-covariance matrix of n assets. We propose a Kalman-filter-based methodology that allows us to deconstruct...