We propose an extension of the model proposed by Barndorff-Nielsen and Shephard, based on stochastic processes of Ornstein-Uhlenbeck taking values in Hilbert spaces, including the leverage effect. We compute explicitly the characteristic function of the logreturn and the volatility processes. By...

This paper is concerned with managing risk exposure to temperature using weather derivatives. We consider hedging temperature risk using so-called HDD- and CDD-index futures, which are instruments written on temperatures in specific locations over specific time periods. The temperatures are...

We propose a quasi-Monte Carlo (qMC) algorithm to simulate variates from the normal inverse Gaussian (NIG) distribution. The algorithm is based on a Monte Carlo technique found in Rydberg [13], and is based on sampling three independent uniform variables. We apply the algorithm to three problems...

We consider the problem of utility indifference pricing of a put option written on a non-tradeable asset, where we can hedge in a correlated asset. The dynamics are assumed to be a two-dimensional geometric Brownian motion, and we suppose that the issuer of the option have exponential risk...

Based on a non-Gaussian Ornstein–Uhlenbeck model for energy spot, we derive prices for Asian and spread options using Fourier techniques. The option prices are expressed in terms of the Fourier transform of the payoff function and the characteristic functions of the driving noises, being...

In this paper we provide a framework that explains how the market risk premium, defined as the difference between forward prices and spot forecasts, depends on the risk preferences of market players and the interaction between buyers and sellers. In commodities markets this premium is an...