In electricity markets, futures contracts typically function as a swap since they deliver the underlying over a period of time. In this paper, we introduce a market price for the delivery periods of electricity swaps, thereby opening an arbitrage-free pricing framework for derivatives based on...

Using powerful technique of stochastic time change, we introduce a new two-factor commodity price model, where one of the fundamental factors is the activity rate. This factor implicitly introduces stochastic volatility into the model. The model is developed under both physical and risk neutral...

ABSTRACT. Using a powerful technique of stochastic time change, we introduce a new two factor commodity price model, where one of the fundamental factors is the activity rate of the stochastic clock. This factor implicitly introduces stochastic volatility into the model. The model is developed...