A numerical algorithm for pricing electricity derivatives for jump-diffusion processes based on continuous time lattices

We present a numerical algorithm for pricing derivatives on electricity prices. The algorithm is based on approximating the generator of the underlying price process on a lattice of prices, resulting in an approximation of the stochastic process by a continuous time Markov chain. We numerically study the rate of convergence of the algorithm for the case of the Merton jump-diffusion model and apply the algorithm to calculate prices and sensitivities of both European and Bermudan electricity derivatives when the underlying price follows a stochastic process which exhibits both fast mean-reversion and jumps of large magnitude.     

Eine neue Methode zum Quecksilber-Nachweis

Ohne Zusammenfassung     

Two-sided bounds for the distribution of the deficit at ruin in the renewal risk model

We obtain lower and upper bounds for the severity of ruin in the renewal (Sparre Andersen) model of risk theory. We present two types of bounds: (i) bounds applicable generally; and (ii) exponential bounds for the case where the adjustment coefficient of the risk process exists. Many of these bounds are obtained using existing bounds and the integral equation for the severity of ruin.     

Normative KGP agents

We extend the logical model of agency known as the KGP model, to support agents with normative concepts, based on the roles an agent plays and the obligations and prohibitions that result from playing these roles. The proposed framework illustrates how the resulting normative concepts, including the roles, can evolve dynamically during the lifetime of the agent. Furthermore, we illustrate how these concepts can be combined with the existing capabilities of KGP agents in order to plan for their goals, react to changes in the environment, and interact with other agents. Our approach gives an executable specification of normative concepts that can be used directly for prototyping applications. Fariba Sadri is a senior lecturer at Imperial College London, from where she received her PhD. Her earlier work concentrated on integrity of deductive databases and temporal reasoning, in particular using the event calculus. In more recent years her work has been on agent technologies and multi-agent systems. She has worked on logic-based agent models, reasoning, dynamic belief revision, and inter-agent communication and negotiation for resources. She was co-awarded an EPSRC grant for research into logic-based multi-agents and was co-investigator in the EU SOCS project. Kostas Stathis is a senior lecturer at Royal Holloway, University of London and he holds a PhD from Imperial College London. His research interests are in the area of computational intelligence in general and in the intersection of computational logic and cognitive systems for social computing applications in particular. His research interests include: representation of human-computer (or computer-computer) interaction as a game; cognitive & autonomous agents; artificial agent societies; agent communication; programmable agents and agent platforms. He is a co-investigator of the EU ArguGRID project and was a co-investigator of the EU SOCS project. Francesca Toni is a senior lecturer at Imperial College London, from where she received her PhD. Her earlier work focused on abductive reasoning. In more recent years, she focused on argumentation, agent models and multi-agent systems. She has worked on computational logic-based agent models, agent reasoning, dynamic belief revision, and inter-agent communication and negotiation for resources. She has been co-ordinator of the EU SOCS project, which developed the KGP model of agency, and is coordinator of the EU ArguGRID project, on the application of argumentative agents within grid systems.     

Energy futures prices: term structure models with Kalman filter estimation

We present a class of multi-factor stochastic models for energy futures prices, similar to the interest rate futures models recently formulated by Heath. We do not postulate directly the risk-neutral processes followed by futures prices, but define energy futures prices in terms of a spot price, not directly observable, driven by several stochastic factors. Our formulation leads to an expression for futures prices which is well suited to the application of Kalman filtering techniques together with maximum likelihood estimation methods. Based on these techniques, we perform an empirical study of a one- and a two-factor model for futures prices for natural gas.     

Analysis of the Gerber-Shiu function and dividend barrier problems for a risk process with two classes of claims

In this paper we consider a risk model with two independent classes of insurance risks. We assume that the two independent claim counting processes are, respectively, the Poisson and the generalized Erlang(2) process. We prove that the Gerber-Shiu function satisfies some defective renewal equations. Exact representations for the solutions of these equations are derived through an associated compound geometric distribution and an analytic expression for this quantity is given when the claim severities have rationally distributed Laplace transforms. Further, the same risk model is considered in the presence of a constant dividend barrier. A system of integro-differential equations with certain boundary conditions for the Gerber-Shiu function is derived and solved. Using systems of integro-differential equations for the moment-generating function as well as for the arbitrary moments of the discounted sum of the dividend payments until ruin, a matrix version of the dividends-penalty is derived. An extension to a risk model when the two independent claim counting processes are Poisson and generalized Erlang(ν), respectively, is considered, generalizing the aforementioned results.     

Distributions of the Numbers of Failures and Successes in a Waiting Time Problem

Abstract. In this article we consider infinite sequences of Bernoulli trials and study the exact and asymptotic distribution of the number of failures and the number of successes observed before the r-th appearance of a pair of successes separated by a pre-specified number of failures. Several formulae are provided for the probability mass function, probability generating function and moments of the distribution along with some asymptotic results and a Poisson limit theorem. A number of interesting applications in various areas of applied science are also discussed.     

An algorithm for intersections in ℙ2[N]

We provide an explicit algorithm for computing intersection numbers between basis elements of complementary codimension in the Hilbert scheme of N points in the projective plane.