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Special Semester on Stochastics with Emphasis on Finance
Linz, September 2008 - December 2008
Presentation: Modeling and Pricing of Oil Derivatives in an Incomplete Market

Workshop: Kick-off-Workshop

Time: Fri, September 12, 2008, 09:30-10:20

Speaker: Christoph Reisinger

Abstract

In recent years, the price dynamics of commodities such as crude oil or natural gas has attracted increased interest. In this presentation, we introduce a non-linear spot model with stochastic volatility, which produces multiple equilibria, in agreement with historical time series, and gives rise to a system of Hamilton-Jacobi-Bellman equations for the utility indifference price of option contracts. We develop a convergent numerical scheme and give illustrative simulation examples.

(joint work with Simon Jaeger)

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