PDSim : A Shiny App for Polynomial Diffusion Model Simulation and Estimation

The Schwartz-Smith two-factor model (Schwartz & Smith, 2000) was commonly used in the pricing of commodity futures in the last two decades. In 2016, (Filipovic & Larsson, 2016) introduced a polynomial diffusion framework which allows a more complex struc- ture of spot price. This framework has been applied to electricity forwards (Kleisinger- Yu et al., 2020), in which the spot price is modelled in a quadratic form of two factors. PDSim aims to estimate futures prices as well as the latent state variables, and provides well-designed visualisations. This application is available at https://github.com/peilun-he/ polynomial- diffusion- model- simulation- and- estimation