This paper introduces a new way of estimating parameters in a Brownian motion regime switching asset model to incorporate volatility clustering. The regime switching model is then applied to pricing of up-and-in barrier call options. We take the probability of crossing the barrier between...

We model the logarithm of the spot price of electricity with a normal inverse Gaussian (NIG) process and the wind speed and wind power production with two Ornstein-Uhlenbeck processes. In order to reproduce the correlation between the spot price and the wind power production, namely between a...

These Proceedings offer a selection of peer-reviewed research and survey papers by some of the foremost international researchers in the fields of finance, energy, stochastics and risk, who present their latest findings on topical problems. The papers cover the areas of stochastic modeling in...