EconPapers    
Economics at your fingertips  
 

Fast Pricing of Energy Derivatives with Mean-reverting Jump-diffusion Processes

Nicola Cufaro Petroni and Piergiacomo Sabino

Papers from arXiv.org

Abstract: Most energy and commodity markets exhibit mean-reversion and occasional distinctive price spikes, which results in demand for derivative products which protect the holder against high prices. To this end, in this paper we present exact and fast methodologies for the simulation of the spot price dynamics modeled as the exponential of the sum of an Ornstein-Uhlenbeck and an independent pure jump process, where the latter one is driven by a compound Poisson process with (bilateral) exponentially distributed jumps. These methodologies are finally applied to the pricing of Asian options, gas storages and swings under different combinations of jump-diffusion market models, and the apparent computational advantages of the proposed procedures are emphasized.

Date: 2019-08, Revised 2020-03
New Economics Papers: this item is included in nep-cmp and nep-ene
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://arxiv.org/pdf/1908.03137 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1908.03137

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().

 
Page updated 2020-03-23
Handle: RePEc:arx:papers:1908.03137