Fast Pricing of Energy Derivatives with Mean-reverting Jump Processes
@article{Petroni2019FastPO, title={Fast Pricing of Energy Derivatives with Mean-reverting Jump Processes}, author={Nicola Cufaro Petroni and Piergiacomo Sabino}, journal={arXiv: Computational Finance}, year={2019} }
The law of a mean-reverting (Ornstein-Uhlenbeck) process driven by a compound Poisson with exponential jumps is investigated in the context of the energy derivatives pricing. The said distribution turns out to be related to the self-decomposable gamma laws, and its density and characteristic function are here given in closed-form. Algorithms for the exact simulation of such a process are accordingly derived with the advantage of being significantly faster (at least 30 times) than those…
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