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Modelling electricity futures by ambit fields. (English) Zbl 1304.91213
The authors propose a new model for electricity futures. Their approach is based on “ambit fields”. These are stochastic integrals with respect to an independently scattered, infinitely divisible random measure, with an integrand that is composed of a deterministic weight function and a stochastic volatility factor. In this setting, the authors show how to compute option prices by integral transform methods, propose a simulation algorithm, and also show how to pass from the physical to the risk neutral probability.

MSC:
91G20 Derivative securities (option pricing, hedging, etc.)
91G99 Actuarial science and mathematical finance
60G51 Processes with independent increments; Lévy processes
60G57 Random measures
60G60 Random fields
60H05 Stochastic integrals
60H30 Applications of stochastic analysis (to PDEs, etc.)
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References:
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