Modelling spikes and pricing swing options in electricity markets

Most electricity markets exhibit high volatilities and occasional distinctive price spikes, which result in demand for derivative products which protect the holder against high prices. In this paper we examine a simple spot price model that is the exponential of the sum of an Ornstein–Uhlenbeck and an independent mean-reverting pure jump process. We derive the moment generating function as well as various approximations to the probability density function of the logarithm of the spot price process at maturity T. Hence we are able to calibrate the model to the observed forward curve and present semi-analytic formulae for premia of path-independent options as well as approximations to call and put options on forward contracts with and without a delivery period. In order to price path-dependent options with multiple exercise rights like swing contracts a grid method is utilized which in turn uses approximations to the conditional density of the spot process.     

A new closed-form solution as an extension of the Black–Scholes formula allowing smile curve plotting

In this paper, as a generalization of the Black–Scholes (BS) model, we elaborate a new closed-form solution for a uni-dimensional European option pricing model called the J-model. This closed-form solution is based on a new stochastic process, called the J-process, which is an extension of the Wiener process satisfying the martingale property. The J-process is based on a new statistical law called the J-law, which is an extension of the normal law. The J-law relies on four parameters in its general form. It has interesting asymmetry and tail properties, allowing it to fit the reality of financial markets with good accuracy, which is not the case for the normal law. Despite the use of one state variable, we find results similar to those of Heston dealing with the bi-dimensional stochastic volatility problem for pricing European calls. Inverting the BS formula, we plot the smile curve related to this closed-form solution. The J-model can also serve to determine the implied volatility by inverting the J-formula and can be used to price other kinds of options such as American options.     

A jump-diffusion model for the euro overnight rate

In this work we introduce a jump-diffusion process for the euro overnight rate (the European over night index average) that is able to capture the main characteristics of this rate: (i) dynamics constrained to remain in the corridor of official rates fixed by the European Central Bank; (ii) mean reversion towards the official rate on main refinancing operations; and (iii) highly discontinuous pattern (with jumps), also without variations in the official rate. After calibrating the model parameters on historical data, we implement the model to price an overnight indexed swap. Finally, a comparison between our model and the most common short-term interest rate models is presented.     

谈新会计准则下衍生金融工具的风险防范

衍生金融工具所具有的杠杆性、派生性、不确定性使其在管理风险的同时，可能又会引发一些风险．企业可以采取健全内部风险管理体系、借助会计信息系统及针对具体风险进行管理等方式对其可能带来的风险进行有效防范。     

中国衍生品市场风险的形成和管理

随着我国对外开放程度的增加和与世界其他经济体联系的紧密,我国未来可能受到外部金融风险的可能性就会增加,为此,我国应采用衍生工具来规避金融风险。本文研究了我国可能在衍生市场出现的风险,并分析了其产生的原因,进而提出了规避可能出现风险的办法和对衍生市场监管的措施。     

Use of derivatives in public sector organizations

The present paper develops and tests a model explaining public sector derivative use in terms of budget discrepancy minimization. The model is different from private sector models. Private sector models do not readily translate into the public sector, which typically faces different objectives. Hypotheses are developed and tested using logistic regression over a sample of Australian Commonwealth public sector organizations. It is found that public sector organization derivative use is positively correlated with liabilities and size consistent with the hypotheses concerning budget discrepancy management.     

股指期货在中国的"水土不服"

本文从目前股指期货的国际形势入手 ,分析了我国股指期货推出的必要性。经过详细的论证后 ,得出股指期货目前在中国还不具备现实可行性的结论。     

Comparison of randomization techniques for low-discrepancy sequences in finance

This paper deals with comparisons of low-discrepancy sequences in terms of actual performance through numerical computation for option pricing. For that purpose, we construct a variety of randomized low-discrepancy sequences based on classical low-discrepancy sequences. A randomization structure by coordinate-wise and digit-wise permutations proves to give excellent results regardless of the classical low-discrepancy sequences. This paper represents only the author’s personal opinion, and has absolutely nothing to do with his affiliation.     

Risk measure pricing and hedging in incomplete markets

This article attempts to extend the complete market option pricing theory to incomplete markets. Instead of eliminating the risk by a perfect hedging portfolio, partial hedging will be adopted and some residual risk at expiration will be tolerated. The risk measure (or risk indifference) prices charged for buying or selling an option are associated to the capital required for dynamic hedging so that the risk exposure will not increase. The associated optimal hedging portfolio is decided by minimizing a convex measure of risk. I will give the definition of risk-efficient options and confirm that options evaluated by risk measure pricing rules are indeed risk-efficient. Relationships to utility indifference pricing and pricing by valuation and stress measures will be discussed. Examples using the shortfall risk measure and average VaR will be shown. The work of Mingxin Xu is supported by the National Science Foundation under grant SES-0518869. I would like to thank Steven Shreve for insightful comments, especially his suggestions to extend the pricing idea from using shortfall risk measure to coherent ones, and to study its relationship to utility based derivative pricing. The comments from the associate editor and the anonymous referee have reshaped the paper into its current version. The paper has benefited from discussions with Freddy Delbaen, Jan Večeř, David Heath, Dmitry Kramkov, Peter Carr, and Joel Avrin.