Efficient pricing of commodity options with early-exercise under the Ornstein-Uhlenbeck process

DOI10.1016/J.APNUM.2011.10.005MaRDI QIDQ655547zbMATH OpenOpenAlexFDO

Authors B. Zhang, Lech A. Grzelak, Cornelis W. Oosterlee

Publication date 4 January 2012

Published in Applied Numerical Mathematics (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1016/j.apnum.2011.10.005

zbMATH Keywords

early-exercise commodity optionsefficient pricingerror analysisFourier-cosine expansionsOrnsteinUhlenbeck process

Mathematics Subject Classification ID

Numerical methods for trigonometric approximation and interpolation (65T40) Numerical methods for discrete and fast Fourier transforms (65T50) Derivative securities (option pricing, hedging, etc.) (91G20) Numerical methods (including Monte Carlo methods) (91G60)

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Cites work

• A continuous time model to price commodity-based swing options
• A jump-diffusion model for option pricing
• A novel pricing method for European options based on Fourier-cosine series expansions
• Electricity prices and power derivatives: evidence from the Nordic Power Exchange
• Financial Modelling with Jump Processes
• Normal Inverse Gaussian Distributions and Stochastic Volatility Modelling
• Option pricing when underlying stock returns are discontinuous
• Pricing early-exercise and discrete barrier options by Fourier-cosine series expansions
• Pricing in Electricity Markets: A Mean Reverting Jump Diffusion Model with Seasonality
• Pricing interest-rate-derivative securities
• The Variance Gamma Process and Option Pricing
• Transform Analysis and Asset Pricing for Affine Jump-diffusions

Cited in

(7)

• An application of Ornstein-Uhlenbeck process to commodity pricing in Thailand
• Valuation of electricity storage contracts using the COS method
• Maximum likelihood estimators in linear regression models with Ornstein-Uhlenbeck process
• Analytical approximation method of option pricing under geometric mean-reverting process
• European call option pricing under reflected Vasicek-Ornstein-Uhlenbeck model
• Time-changed Ornstein-Uhlenbeck processes and their applications in commodity derivative models
• An efficient algorithm based on eigenfunction expansions for some optimal timing problems in finance

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