کد مقاله | کد نشریه | سال انتشار | مقاله انگلیسی | نسخه تمام متن |
---|---|---|---|---|
480323 | 1446070 | 2012 | 8 صفحه PDF | دانلود رایگان |
![عکس صفحه اول مقاله: A numerical algorithm for pricing electricity derivatives for jump-diffusion processes based on continuous time lattices A numerical algorithm for pricing electricity derivatives for jump-diffusion processes based on continuous time lattices](/preview/png/480323.png)
We present a numerical algorithm for pricing derivatives on electricity prices. The algorithm is based on approximating the generator of the underlying price process on a lattice of prices, resulting in an approximation of the stochastic process by a continuous time Markov chain. We numerically study the rate of convergence of the algorithm for the case of the Merton jump-diffusion model and apply the algorithm to calculate prices and sensitivities of both European and Bermudan electricity derivatives when the underlying price follows a stochastic process which exhibits both fast mean-reversion and jumps of large magnitude.
► Numerical algorithm to approximate stochastic processes with asymmetric jumps.
► Based on continuous time Markov chain approximation.
► Numerical study of convergence for the case of Merton jump-diffusion.
► Application to calibrated Geman-Roncoroni model of electricity prices.
Journal: European Journal of Operational Research - Volume 222, Issue 2, 16 October 2012, Pages 361–368