In electricity markets, futures contracts typically function as a swap since they deliver the underlying over a period of time. In this paper, we introduce a market price for the delivery periods of electricity swaps, thereby opening an arbitrage-free pricing framework for derivatives based on...

By employing a continuous time stochastic volatility model, the dynamic relation between price returns and volatility changes in the commodity futures markets is analysed. An extensive daily database of gold and crude oil futures and futures options is used to estimate the model that is well...

We introduce tractable models for commodity derivatives pricing with inventory and volatility effects, and illustrate with applications to the oil market. We contribute to the existing literature in several respects. First, whereas the previous literature uses futures data for investigating the...

The purpose of this paper is to show that using the toolkit of interest rate theory, already well known in financial engineering as the HJM model [D. Heath, R. Jarrow, A. Morton, Econometrica 60, 77 (1992)], it is possible to derive explicite option pricing formula and calibrate the theoretical...

This work discusses potential pitfalls of applying linear regression models to explaining the relationship between spot and futures prices in electricity markets. We briefly introduce the theory for the analysis of the spot-futures price relationship and highlight selected issues of multiple...

We prove that the Heston volatility is Malliavin differentiable under the classical Novikov condition and give an explicit expression for the derivative. This result guarantees the applicability of Malliavin calculus in the framework of the Heston stochastic volatility model. Furthermore we...

We follow Mercurio's extension of the LIBOR market model with stochastic Basis spreads and model the joint evolution of forward rates belonging to the discount curve and corresponding spreads with FRA rates. We consider Heston stochastic-volatility dynamics and show how to calculate the swaption...