# 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…

## Figures and Tables from this paper

## References

SHOWING 1-10 OF 31 REFERENCES

Pricing of Swing Options in a Mean Reverting Model with Jumps

- Mathematics
- 2008

We investigate the pricing of swing options in a model where the logarithm of the spot price is the sum of a deterministic seasonal trend and an Ornstein–Uhlenbeck process driven by a jump diffusion.…

Pricing exchange options with correlated jump diffusion processes

- Mathematics
- 2020

We study the applicability to energy facilities of a model for correlated Poisson processes generated by self-decomposable jumps. In this context, the implementation of our approach, both to shape…

A Non‐Gaussian Ornstein–Uhlenbeck Process for Electricity Spot Price Modeling and Derivatives Pricing

- Mathematics
- 2007

A mean‐reverting model is proposed for the spot price dynamics of electricity which includes seasonality of the prices and spikes. The dynamics is a sum of non‐Gaussian Ornstein–Uhlenbeck processes…

Stochastic Models of Energy Commodity Prices and Their Applications : Mean-reversion with Jumps and Spikes

- Economics
- 1998

I propose several mean-reversion jump-di usion models to describe spot prices of energy commodities that may be very costly to store. I incorporate multiple jumps, regime-switching and stochastic…

MULTI-FACTOR JUMP-DIFFUSION MODELS OF ELECTRICITY PRICES

- Mathematics
- 2008

The recent deregulation of electricity markets has led to the creation of energy exchanges, where the electricity is freely traded. In this paper, we study the most salient statistical features of…

Gas Storage Valuation Under Lévy Processes Using the Fast Fourier Transform

- Economics
- 2015

In this paper we study the modeling and computational benefits of using Levy processes and the Fast Fourier Transform (FFT) in the valuation of gas storage assets and, from a practitioners…

Coupling Poisson Processes by Self-Decomposability

- Mathematics
- 2017

We analyze a method to produce pairs of non-independent Poisson processes M(t), N(t) from positively correlated, self-decomposable, exponential renewals. In particular, the present paper provides the…

Non‐Gaussian Ornstein–Uhlenbeck‐based models and some of their uses in financial economics

- Economics, Mathematics
- 2001

Non‐Gaussian processes of Ornstein–Uhlenbeck (OU) type offer the possibility of capturing important distributional deviations from Gaussianity and for flexible modelling of dependence structures.…

Pricing swing options and other electricity derivatives

- Mathematics
- 2006

The deregulation of regional electricity markets has led to more competitive prices but also higher uncertainty in the future electricity price development. Most markets exhibit high volatilities and…

A non-Gaussian Ornstein–Uhlenbeck model for pricing wind power futures

- Mathematics
- 2018

ABSTRACT The recent introduction of wind power futures written on the German wind power production index has brought with it new interesting challenges in terms of modelling and pricing. Some…