In this study, we consider the pricing of energy derivatives when the evolution of spot prices follows a tempered stable or a CGMY-driven Ornstein-Uhlenbeck process. To this end, we first calculate the characteristic function of the transition law of such processes in closed form. This result is...

In this paper we consider several time-varying volatility and/or heavy-tailed models to explain the dynamics of return time series and to fit the volatility smile for exchange-traded options where the underlying is the main �Borsa Italiana� stock index. Given observed prices for the...

We study the one-dimensional Ornstein-Uhlenbeck (OU) processes with marginal law given by the tempered stable and tempered infinitely divisible distributions proposed by Rosinski (2007) and Bianchi et al. (2010b), respectively. In general, the use of non-Gaussian OU processes is impeded by...

Most of the important models in finance rest on the assumption that randomness is explained through a normal random variable because, in general, the use of alternative models is obstructed by the difficulty of calibrating and simulating them. In this paper, we empirically study models for...