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June 2013 Pricing of forwards and options in a multivariate non-Gaussian stochastic volatility model for energy markets
F. E. Benth, L. Vos
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Adv. in Appl. Probab. 45(2): 572-594 (June 2013). DOI: 10.1239/aap/1370870130

Abstract

In Benth and Vos (2013) we introduced a multivariate spot price model with stochastic volatility for energy markets which captures characteristic features, such as price spikes, mean reversion, stochastic volatility, and inverse leverage effect as well as dependencies between commodities. In this paper we derive the forward price dynamics based on our multivariate spot price model, providing a very flexible structure for the forward curves, including contango, backwardation, and hump shape. Moreover, a Fourier transform-based method to price options on the forward is described.

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F. E. Benth. L. Vos. "Pricing of forwards and options in a multivariate non-Gaussian stochastic volatility model for energy markets." Adv. in Appl. Probab. 45 (2) 572 - 594, June 2013. https://doi.org/10.1239/aap/1370870130

Information

Published: June 2013
First available in Project Euclid: 10 June 2013

zbMATH: 1269.91083
MathSciNet: MR3102463
Digital Object Identifier: 10.1239/aap/1370870130

Subjects:
Primary: 60G10
Secondary: 15A04, 60G51, 60H30, 91G20

Rights: Copyright © 2013 Applied Probability Trust

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Vol.45 • No. 2 • June 2013
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