Corpus ID: 211146124

The Market Price of Risk for Delivery Periods: Pricing Swaps and Options in Electricity Markets

@article{Kemper2020TheMP,
  title={The Market Price of Risk for Delivery Periods: Pricing Swaps and Options in Electricity Markets},
  author={Annika Kemper and M. Schmeck and Anna Kh. Balci},
  journal={arXiv: Pricing of Securities},
  year={2020}
}
In electricity markets, futures contracts typically function as a swap since they deliver the underlying over a period of time. In this paper, we introduce a market price for the delivery periods of electricity swaps, thereby opening an arbitrage-free pricing framework for derivatives based on these contracts. Furthermore, we use a weighted geometric averaging of an artificial geometric futures price over the corresponding delivery period. Without any need for approximations, this averaging… Expand

Figures from this paper

References

SHOWING 1-10 OF 31 REFERENCES
Pricing Futures and Options in Electricity Markets
  • 17
  • PDF
Stochastic Modeling of Electricity and Related Markets
  • 374
  • Highly Influential
  • PDF
A pricing method for options based on average asset values
  • 600
On the seasonality in the implied volatility of electricity options
  • 8
Seasonal Stochastic Volatility: Implications for the Pricing of Commodity Options
  • 28
  • Highly Influential
  • PDF
Pricing Options on Forwards in Energy Markets: The Role of Mean Reversion's Speed
  • 7
  • PDF
Valuation and Risk Management in the Norwegian Electricity Market
  • 36
  • Highly Influential
  • PDF
A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options
  • 7,658
  • Highly Influential
  • PDF
Dynamic Asset Pricing Theory
  • 2,759
  • Highly Influential
  • PDF
...
1
2
3
4
...