
THE
FIELDS INSTITUTE FOR RESEARCH IN MATHEMATICAL SCIENCES

Focus
Program on Commodities, Energy and Environmental Finance
Summer
School: August 627, 2013



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The minicourses will each consist of 5 lectures.
Speaker 
Title and Abstract 
Glen Swindle
Scoville Risk Partners
Aug 6 and Aug 8
Lectures 13
10:00 11:00 a.m.
Aug. 12 and Aug 13,
Lectures 45
10:00  11:00 a.m.

MiniCourse on Valuing and Trading Correlation Structures
in Commodities
Lectures 13 (slide 1, slide
2, slide 3, slide
4)
Lectures 45

Fred Benth
University of Oslo
August 19, Monday  August 23, Friday
Lectures 15
11:0012:30 p.m. 
MiniCourse on Stochastic Models of Electricity Markets
Lecture 1: slides
Lecture 2: slides
In this minicourse 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 motiondriven factor
models for spot price modelling will be explained in view
of data, motivating the introduction of jump and higherorder
continuoustime autoregressive moving average (CARMA) processes.
We discuss a class of structurepreserving 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 minicourse we will consider
pricing and hedging of socalled 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 12
1:002:00 p.m.
Aug. 26, Mon
Lecture 3
1:002:00 p.m.
Aug. 27, Tues.
Lectures 45
9:0011:00 a.m. 
MiniCourse on Financialization of the Commodity Markets
and Mean Field Games
Slide 1&2, Slide
3,4&5

The three minicourses 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.
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