Abstract
Spot prices in energy markets exhibit special features, such as price spikes, mean reversion, stochastic volatility, inverse leverage effect, and dependencies between the commodities. In this paper a multivariate stochastic volatility model is introduced which captures these features. The second-order structure and stationarity of the model are analyzed in detail. A simulation method for Monte Carlo generation of price paths is introduced and a numerical example is presented.
Citation
F. E. Benth. L. Vos. "Cross-commodity spot price modeling with stochastic volatility and leverage for energy markets." Adv. in Appl. Probab. 45 (2) 545 - 571, June 2013. https://doi.org/10.1239/aap/1370870129
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