Category Rapports

Juil
2013

Utility Indifference Valuation for Non-Smooth Payoffs with an Application to Power Derivatives

RR-FiME-13-03 Giuseppe Benedetti, Luciano Campi We consider the problem of exponential utility indifference valuation under the simplified framework where traded and nontraded assets are uncorrelated but where the claim to be priced possibly depends on both. Traded asset prices follow a multivariate Black and Scholes model, while nontraded asset prices evolve as generalized Ornstein-Uhlenbeck processes. …

Mai
2013

Real option game with a random regulator: the value of being preferred

RR-FiME-13-02 Adrien Nguyen Huu We attempt to formalize a randomization procedure undertaken in pre-emptive real option games without simultaneous investment. This allows to propose a unified treatment of both real option games with and without simultaneous investment. This is done by introducing a random arbitrator with different parametrization. We then extend the study to an …

Jan
2013

Banking and Backloading Emission Permits

RR-FIME-13-01 Corinne CHATON, Anna CRETI, Benoît PELUCHON In this article we focus on carbon price dynamics, more specfically the impact of a policy envisaged by the European Commission to increase the CO2 price. This policy consists of removing a share of the allowances al- located for a period in order to reallocate some or all …

Oct
2012

A Probabilistic Numerical Method for Optimal Multiple Switching Problem and Application to Investments in Electricity Generation

RR-FiME-12-07 René Aïd, Luciano Campi, Nicolas Langrené, Huyên Pham In this paper, we present a probabilistic numerical algorithm combining dynamic programming, Monte Carlo simulations and local basis regressions to solve non-stationary optimal multiple switching problems in infinite horizon. We provide the rate of convergence of the method in terms of the time step used to …

Août
2012

A review of optimal decision rule for investment in electricity generation

RR-FiME-12-04 Carmine De Franco, Peter Tankov, Xavier Warin We develop algorithms for the numerical computation of the quadratic hedging strategy in incomplete markets modeled by pure jump Markov process. Using the Hamilton-Jacobi-Bellman approach, the value function of the quadratic hedging problem can be related to a triangular system of parabolic partial integro-differential equations (PIDE), which …

Juil
2012

A review of optimal decision rule for investment in electricity generation

R. Aïd This paper provides an introduction to optimal investment rules in electricity generation. It attempts to bring together methods commonly used in practice to assess electricity generation investments as well as the sophisticated tools developed by mathematical economists in the last thirty years. It begins with a description of the fundamentals of the problem …

Juin
2012

A Principal-Agent Problem for Emissions’ Reduction

RR-FiME-12-06 Giuseppe Benedetti We analyze a principal-agent problem between the state (principal) and a firm (agent) which produces carbon emissions. In particular, the aim of the state is to motivate the firm to reduce those emissions as much as possible by structuring an appropriate incentive policy. We allow for two different kinds of incentives: a …

Fév
2012

On Some Expectation and Derivative Operators Related to Integral Representations of Random Variables with Respect to a PII process

RR-FiME-12-05 Stéphane GOUTTE, Nadia OUDJANE, Francesco RUSSO Given a process with independent increments X (not necessarily a martingale) and a large class of square integrable r.v. H = f(XT ), f being the Fourier transform of a finite measure μ, we provide explicit Kunita-Watanabe and Föllmer-Schweizer decompositions. The representation is expressed by means of two …

Fév
2012

Optimal Liquidity Management and Hedging in the Presence

Stéphane Villeneuve, Xavier Warin In this paper, we develop a dynamic model that captures the interaction between a firm’s cash reserves, the risk management policy and the profitability of a nonpredictable irreversible investment opportunity. We consider a firm that has assets in place generating a stochastic cash- flow stream. The firm has a non-predictable growth …

Jan
2012

A note on super-hedging for investor-producers

Adrien Nguyen Huu We study the situation of an investor-producer who can trade on a financial market in continuous time and can transform some assets into others by means of a discrete time production system, in order to price and hedge derivatives on produced goods. This general framework covers the interesting case of an electricity …

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