April 19, 2014

Focus Program on Commodities, Energy and Environmental Finance

Summer School: August 6-27, 2013

To be informed of program updates please subscribe to the Fields maillist.

The mini-courses will each consist of 5 lectures.

Speaker Title and Abstract

Glen Swindle
Scoville Risk Partners

Aug 6 and Aug 8
Lectures 1-3
10:00 -11:00 a.m.

Aug. 12 and Aug 13,
Lectures 4-5
10:00 - 11:00 a.m.

Mini-Course on Valuing and Trading Correlation Structures in Commodities

Lectures 1-3 (slide 1, slide 2, slide 3, slide 4)

Lectures 4-5

Fred Benth
University of Oslo

August 19, Monday - August 23, Friday
Lectures 1-5

11:00-12:30 p.m.

Mini-Course on Stochastic Models of Electricity Markets
Lecture 1: slides
Lecture 2: slides

In this mini-course we will introduce stochastic models for energy markets, and demonstrate how these can be used to price forward/futures contracts and other derivatives. Typical markets we have in mind are those for electricity and temperature.

The shortcomings of basic Brownian motion-driven factor models for spot price modelling will be explained in view of data, motivating the introduction of jump and higher-order continuous-time autoregressive moving average (CARMA) processes. We discuss a class of structure-preserving measure changes for such processes, defining a parametric family of pricing measures for analysis of derivatives in energy markets. In particular we shall derive forward prices under this class of pricing measures. It turns out that we obtain a stochastic risk premium, where one can explain mathematically why electricity markets may have a positive premium in the short end of the market, while in the long end the premium is negative as is the normal situation in commodity markets. We analyse the structure of the forward curve as a function of the spot dynamics as well as the term structure of volatility.

In the final part of the mini-course we will consider pricing and hedging of so-called quanto options, that is, options on energy prices triggered by weather events. Such derivatives give a protection against price and volume risk. An empirical case study from the US gas and temperature market is presented. We make some final notes on the hedging issue for these options.

René Carmona
Princeton University

Aug. 12, Mon.-
Aug. 13, Tues.
Lectures 1-2
1:00-2:00 p.m.

Aug. 26, Mon
Lecture 3
1:00-2:00 p.m.

Aug. 27, Tues.
Lectures 4-5
9:00-11:00 a.m.

Mini-Course on Financialization of the Commodity Markets and Mean Field Games

Slide 1&2, Slide 3,4&5

The three mini-courses will be spread over 4 weeks with each day having 1 or 2 hours of lectures (1 hour in the morning, 1 hour in the afternoon) and additional planned activities daily including guest lecturers. Some background in probability and stochastic processes are expected.

Back to top