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...

In power markets one frequently encounters a risk premium being positive in the short end of the forward curve, and negative in the long end. Economically it has been argued that the positive premium is reflecting retailers aversion for spike risk, wheras in the long end of the forward curve the...

The academic interest in utility indifference based approaches to derivative pricing in incomplete markets has grown during the last decades. In lack of arbitrage arguments the fair price of an option can be found through the value function of two optional investment choices, one where an option...

This paper introduces the class of volatility modulated Lévy-driven Volterra (VMLV) processes and their important subclass of Lévy semistationary (LSS) processes as a new framework for modelling energy spot prices. The main modelling idea consists of four principles: First, deseasonalised spot...

We conduct an empirical analysis of three recently proposed and widely used models for electricity spot price process. The first model, called the jump-diffusion model, was proposed by Cartea and Figueroa (2005), and is a one-factor mean-reversion jump-diffusion model, adjusted to incorporate...

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...

We consider portfolio optimization in futures markets. We model the entire futures price curve at once as a solution of a stochastic partial differential equation. The agents objective is to maximize her utility from the final wealth when investing in futures contracts. We study a class of...