A note on arbitrage-free pricing of forward contracts in energy markets
Authors:
Fred Espen Benth a;
Lars Ekeland b;
Ragnar Hauge c;
Bj
Rn Fredrik Nielsen d
Rn Fredrik Nielsen d
| Affiliations: | a Centre of Mathematics for Applications, Department of Mathematics, University of Oslo, Blindern, N-0316 Oslo, Norway |
| b Norsk Hydro ASA, N-0240 Oslo, Norway | |
| c Norwegian Computing Centre, Blindern, N-0314 Oslo, Norway | |
| d Simula Research Laboratory, N-1325 Lysaker, Norway |
DOI:
10.1080/1350486032000160777
Publication Frequency:
6 issues per year
Formats available:
PDF
(English)
View Article:
View Article (PDF)
Abstract
Arbitrage 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 L
vy noise. Findings are illustrated with examples from oil and electricity markets.
|
Keywords:
incomplete markets;
forward pricing;
energy markets;
no-arbitrage pricing;
L vy processes
|
| view citations (2) |

Download Citation

vy noise. Findings are illustrated with examples from oil and electricity markets.
CiteULike
Del.icio.us
BibSonomy
Connotea