Capturing the power options smile by an additive two-factor model for overlapping futures prices
Piccirilli M, Schmeck MD, Vargiolu T (2019) Center for Mathematical Economics Working Papers; 625.
Bielefeld: Center for Mathematical Economics.
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| Veröffentlicht | Englisch
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Autor*in
Piccirilli, Marco;
Schmeck, Maren DianeUniBi;
Vargiolu, Tiziano
Abstract / Bemerkung
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.
Stichworte
Volatility Smile;
Overlapping Delivery Periods;
Arbitrage;
Additive Models;
Power Options;
FFT
Erscheinungsjahr
2019
Serientitel
Center for Mathematical Economics Working Papers
Band
625
Seite(n)
34
ISSN
0931-6558
Page URI
https://pub.uni-bielefeld.de/record/2937756
Zitieren
Piccirilli M, Schmeck MD, Vargiolu T. Capturing the power options smile by an additive two-factor model for overlapping futures prices. Center for Mathematical Economics Working Papers. Vol 625. Bielefeld: Center for Mathematical Economics; 2019.
Piccirilli, M., Schmeck, M. D., & Vargiolu, T. (2019). Capturing the power options smile by an additive two-factor model for overlapping futures prices (Center for Mathematical Economics Working Papers, 625). Bielefeld: Center for Mathematical Economics.
Piccirilli, Marco, Schmeck, Maren Diane, and Vargiolu, Tiziano. 2019. Capturing the power options smile by an additive two-factor model for overlapping futures prices. Vol. 625. Center for Mathematical Economics Working Papers. Bielefeld: Center for Mathematical Economics.
Piccirilli, M., Schmeck, M. D., and Vargiolu, T. (2019). Capturing the power options smile by an additive two-factor model for overlapping futures prices. Center for Mathematical Economics Working Papers, 625, Bielefeld: Center for Mathematical Economics.
Piccirilli, M., Schmeck, M.D., & Vargiolu, T., 2019. Capturing the power options smile by an additive two-factor model for overlapping futures prices, Center for Mathematical Economics Working Papers, no.625, Bielefeld: Center for Mathematical Economics.
M. Piccirilli, M.D. Schmeck, and T. Vargiolu, Capturing the power options smile by an additive two-factor model for overlapping futures prices, Center for Mathematical Economics Working Papers, vol. 625, Bielefeld: Center for Mathematical Economics, 2019.
Piccirilli, M., Schmeck, M.D., Vargiolu, T.: Capturing the power options smile by an additive two-factor model for overlapping futures prices. Center for Mathematical Economics Working Papers, 625. Center for Mathematical Economics, Bielefeld (2019).
Piccirilli, Marco, Schmeck, Maren Diane, and Vargiolu, Tiziano. Capturing the power options smile by an additive two-factor model for overlapping futures prices. Bielefeld: Center for Mathematical Economics, 2019. Center for Mathematical Economics Working Papers. 625.
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2019-10-07T12:28:57Z
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