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Titel
Capturing the power options smile by an additive two-factor model for overlapping futures prices / Marco Piccirilli, Maren Diane Schmeck, and Tiziano Vargiolu
VerfasserPiccirilli, Marco ; Schmeck, Maren Diane ; Vargiolu, Tiziano In der Gemeinsamen Normdatei der DNB nachschlagen
ErschienenBielefeld, Germany : Center for Mathematical Economics (IMW), Bielefeld University, September 2019
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Elektronische Ressource
Umfang1 Online-Ressource (33 Seiten) : Diagramme
SerieCenter for Mathematical Economics Working papers ; 625
URNurn:nbn:de:hbz:6:2-121953 Persistent Identifier (URN)
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Capturing the power options smile by an additive two-factor model for overlapping futures prices [0.6 mb]
Zusammenfassung

In this paper we introduce an additive two-factor model for electricity futures prices based on Normal Inverse Gaussian Lévy processes, that fulfills a no-overlapping-arbitrage (NOA) condition. We compute European option prices by Fourier transform methods, introduce a specific calibration procedure that takes into account no-arbitrage constraints and fit the model to power option settlement prices of the European Energy Exchange (EEX). We show that our model is able to reproduce the different levels and shapes of the implied volatility (IV) profiles displayed by options with a variety of delivery periods.

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