In this paper, the impacts of an incentive-based Demand Response, i.e., Ancillary Service DR (ASDR), and a price-based DR, i.e., Time of Use (ToU), are revealed in a restructured power system which has some wind farms. This network is designed based on the pre-emptive market which is a day-ahead market with a balancing market prognosis. It is a proper mechanism to deal with the stochastic natur...

In this paper, Black Scholes’s pricing model was developed to study American option on future contracts of Brent oil. The practical tests of the model show that market priced option contracts as future contracts less than what model did, which mostly represent option contracts with price rather than without price. Moreover, it suggests call option rather than put option. Using t hypothesis test...

This paper investigates a dynamic CAPM in which investors may trade in put option contracts which are zero in net supply. In each period, stock and option prices are endogenously and simultaneously determined by market clearing in the respective markets. We investigate how these endogenously formed option prices impact on prices and portfolio allocations. The introduction of a put-option market...

A simple exotic option (floor on rolled deposit) is studied in the shifted log-normal Libor Market (LMM) and Gaussian HJM models. The shifted log-normal LMM exhibits a controllable volatility skew. An explicit approach is used for both models. Using approximations the price in the LMM is obtained without Monte Carlo simulation. The more precise approximation uses a twisted version of the perdic...

This article provides an overview of market-based option pricing and its applications. First, two fundamental approaches for market-based option pricing from the literature are introduced. Then, three important new processes, the deterministic volatility model, the stochastic volatility model, and a model including jump, are discussed. Finally, several empirical analyses on the NIKKEI225 option...