Pricing of Commodity and Energy Derivatives for Polynomial Processes

Operating in energy and commodity markets require a management of risk using derivative products such as forward futures, well options on these. Many the popular stochastic models for spot dynamics weather variables developed from empirical studies belong to class polynomial jump diffusion processes. We derive tailor-made framework efficient approximation main derivatives encountered markets, encompassing wide range arithmetic geometric models. Our analysis accounts seasonality effects, delivery periods forwards exotic temperature where underlying “spot” is nonlinear function temperature. also include our derivations spread, Asian quanto options.