<p>e will evaluate forward contracts in the electricity market. A thorough presentation of stochastic analysis for processes with discontinuous paths are provided, and some results concerning these from mathematical finance are stated. Using a Feynman-Kac-type theorem by Pham we derive a partial integro-differential equation giving the forward price from the spot dynamics taken from Geman and Roncoroni. This spot model is regime switching, so we get two equations. These equations are then attempted solved numerically. We suggest the following approach: When implementing boundary-conditions numerically we use values obtained from a Monte Carlo simulation of the spot dynamics to calibrate the boundary.</p>
| Identifer | oai:union.ndltd.org:UPSALLA/oai:DiVA.org:ntnu-9662 |
| Date | January 2007 |
| Creators | Skogtrø, Bjørn Waage |
| Publisher | Norwegian University of Science and Technology, Department of Mathematical Sciences, Institutt for matematiske fag |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Student thesis, text |
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