English, Article edition: ENERGY SPOT PRICE MODELS AND SPREAD OPTIONS PRICING SAMUEL HIKSPOORS; SEBASTIAN JAIMUNGAL

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Physical Description
  • article
Language
  • English

Edition details

Title
  • ENERGY SPOT PRICE MODELS AND SPREAD OPTIONS PRICING
Author
  • SAMUEL HIKSPOORS
  • SEBASTIAN JAIMUNGAL
Physical Description
  • article
Notes
  • In this article, we construct forward price curves and value a class of two asset exchange options for energy commodities. We model the spot prices using an affine two-factor mean-reverting process with and without jumps. Within this modeling framework, we obtain closed form results for the forward prices in terms of elementary functions. Through measure changes induced by the forward price process, we further obtain closed form pricing equations for spread options on the forward prices. For completeness, we address both an Actuarial and a risk-neutral approach to the valuation problem. Finally, we provide a calibration procedure and calibrate our model to the NYMEX Light Sweet Crude Oil spot and futures data, allowing us to extract the implied market prices of risk for this commodity.
  • Energy markets, spread options, multi-factor jump-diffusions, transform methods
  • RePEc:wsi:ijtafx:v:10:y:2007:i:07:p:1111-1135
Language
  • English
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