A note on arbitrage-free pricing of forward contracts in energy markets
AbstractArbitrage theory is used to price forward (futures) contracts in energy markets, where the underlying assets are non-tradeable. The method is based on the so-called 'fitting of the yield curve' technique from interest rate theory. The spot price dynamics of Schwartz is generalized to multidimensional correlated stochastic processes with Wiener and Levy noise. Findings are illustrated with examples from oil and electricity markets.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Mathematical Finance.
Volume (Year): 10 (2003)
Issue (Month): 4 ()
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