Optimal quantization for the pricing of swing options

In this paper, we investigate a numerical algorithm for the pricing of swing options, relying on the so-called optimal quantization method. The numerical procedure is described in details and numerous simulations are provided to assert its efficiency. In particular, we carry out a comparison with the Longstaff-Schwartz algorithm.Comment: 27

The valuation of clean spread options: linking electricity, emissions and fuels

The purpose of the paper is to present a new pricing method for clean spread options, and to illustrate its main features on a set of numerical examples produced by a dedicated computer code. The novelty of the approach is embedded in the use of a structural model as opposed to reduced-form models which fail to capture properly the fundamental dependencies between the economic factors entering the production process

A non-parametric structural hybrid modeling approach for electricity prices

We develop a stochastic model of zonal/regional electricity prices, designed to reflect information in fuel forward curves and aggregated capacity and load as well as zonal or regional price spreads. We use a nonparametric model of the supply stack that captures heat rates and fuel prices for all generators in the market operator territory, combined with an adjustment term to approximate congestion and other zone-specific behavior. The approach requires minimal calibration effort, is readily adaptable to changing market conditions and regulations, and retains sufficient tractability for the purpose of forward price calibration. The model is illustrated for the spot and forward electricity prices of the PS zone in the PJM market, and the set of time-dependent risk premiums are inferred and analyzed

An extended self-organisation principle for modelling and calculating the dissipation of 2D confined vortices

Steady Euler flows in a periodic square that, for positive vorticity distributions, minimise the entropy at given values of the energy and the circulations are non-confined vortices for optimal values of the circulation, and are confined vortices for certain non-optimal values. An extension of the self-organisation principle for the 2D Navier-Stokes equations is presented which models the dissipative evolution of such confined vortices by changing the values of the constraints in time in accordance with the effect of dissipation. An efficient numerical procedure for calculating these confined states is described and calculations of the dissipative evolution are presented