English, Article edition: PRICING OF EXOTIC ENERGY DERIVATIVES BASED ON ARITHMETIC SPOT MODELS FRED ESPEN BENTH; RODWELL KUFAKUNESU

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Bookmark: http://trove.nla.gov.au/version/15764
Physical Description
  • article
Language
  • English

Edition details

Title
  • PRICING OF EXOTIC ENERGY DERIVATIVES BASED ON ARITHMETIC SPOT MODELS
Author
  • FRED ESPEN BENTH
  • RODWELL KUFAKUNESU
Physical Description
  • article
Notes
  • Based on a non-Gaussian OrnsteinâUhlenbeck model for energy spot, we derive prices for Asian and spread options using Fourier techniques. The option prices are expressed in terms of the Fourier transform of the payoff function and the characteristic functions of the driving noises, being independent increment processes. In many relevant situations, these functions are explicitly available, and fast Fourier transform can be used for efficient numerical valuation. The arithmetic nature of our model implies that only a one-dimensional Fourier transform is required in the computation of the price, contrary to geometric models where transformation along both underlying variables is necessary.
  • Energy markets, spread options, Asian options, fast Fourier transform, non-Gaussian OrnsteinâUhlenbeck processes, independent increment processes
  • RePEc:wsi:ijtafx:v:12:y:2009:i:04:p:491-506
Language
  • English
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