Time-varying volatility model equipped with regime switching factor: valuation of option price written on energy futures
This paper explores the calculation of European option prices on energy futures using a time-varying volatility model enhanced by a regime switching factor. We develop a semi-analytical method to determine the price of European options on these energy futures, involving the derivation of the charact...
محفوظ في:
| المؤلف الرئيسي: | |
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| مؤلفون آخرون: | , |
| التنسيق: | article |
| منشور في: |
2025
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| الموضوعات: | |
| الوصول للمادة أونلاين: | https://hdl.handle.net/11073/33301 |
| الوسوم: |
إضافة وسم
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| _version_ | 1864513431758962688 |
|---|---|
| author | Leduc, Guillaume |
| author2 | Mehrdoust, Farshid Noorani, Idin |
| author2_role | author author |
| author_facet | Leduc, Guillaume Mehrdoust, Farshid Noorani, Idin |
| author_role | author |
| dc.creator.none.fl_str_mv | Leduc, Guillaume Mehrdoust, Farshid Noorani, Idin |
| dc.date.none.fl_str_mv | 2025-10-23 2026-04-20T06:53:34Z 2026-04-20T06:53:34Z |
| dc.format.none.fl_str_mv | application/pdf |
| dc.identifier.none.fl_str_mv | Leduc, G., Mehrdoust, F., & Noorani, I. (2026). Time-varying volatility model equipped with regime switching factor: Valuation of option price written on energy futures. Mathematics and Computers in Simulation, 241, 844–867. https://doi.org/10.1016/j.matcom.2025.10.023 0378-4754 https://hdl.handle.net/11073/33301 10.1016/j.matcom.2025.10.023 |
| dc.language.none.fl_str_mv | en |
| dc.publisher.none.fl_str_mv | Elsevier |
| dc.relation.none.fl_str_mv | https://doi.org/10.1016/j.matcom.2025.10.023 |
| dc.subject.none.fl_str_mv | Energy markets EM algorithm Option pricing Regime switching model |
| dc.title.none.fl_str_mv | Time-varying volatility model equipped with regime switching factor: valuation of option price written on energy futures |
| dc.type.none.fl_str_mv | Peer-Reviewed Preprint info:eu-repo/semantics/publishedVersion info:eu-repo/semantics/article |
| description | This paper explores the calculation of European option prices on energy futures using a time-varying volatility model enhanced by a regime switching factor. We develop a semi-analytical method to determine the price of European options on these energy futures, involving the derivation of the characteristic function for the energy futures' dynamics. To determine the parameters of the regime switching model and identify when economic states change, we employ the EM algorithm, utilizing real gas futures price data. We validate our closed-form solution for the option pricing through simulations employing the generalized antithetic variates Monte-Carlo technique. A comprehensive numerical analysis demonstrates the effectiveness of our proposed methodology. |
| format | article |
| id | aus_e0a061d090b44d1266fcca1f08ffbdec |
| identifier_str_mv | Leduc, G., Mehrdoust, F., & Noorani, I. (2026). Time-varying volatility model equipped with regime switching factor: Valuation of option price written on energy futures. Mathematics and Computers in Simulation, 241, 844–867. https://doi.org/10.1016/j.matcom.2025.10.023 0378-4754 10.1016/j.matcom.2025.10.023 |
| language_invalid_str_mv | en |
| network_acronym_str | aus |
| network_name_str | aus |
| oai_identifier_str | oai:repository.aus.edu:11073/33301 |
| publishDate | 2025 |
| publisher.none.fl_str_mv | Elsevier |
| repository.mail.fl_str_mv | |
| repository.name.fl_str_mv | |
| repository_id_str | |
| spelling | Time-varying volatility model equipped with regime switching factor: valuation of option price written on energy futuresLeduc, GuillaumeMehrdoust, FarshidNoorani, IdinEnergy marketsEM algorithmOption pricingRegime switching modelThis paper explores the calculation of European option prices on energy futures using a time-varying volatility model enhanced by a regime switching factor. We develop a semi-analytical method to determine the price of European options on these energy futures, involving the derivation of the characteristic function for the energy futures' dynamics. To determine the parameters of the regime switching model and identify when economic states change, we employ the EM algorithm, utilizing real gas futures price data. We validate our closed-form solution for the option pricing through simulations employing the generalized antithetic variates Monte-Carlo technique. A comprehensive numerical analysis demonstrates the effectiveness of our proposed methodology.American University of SharjahElsevier2026-04-20T06:53:34Z2026-04-20T06:53:34Z2025-10-23Peer-ReviewedPreprintinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfLeduc, G., Mehrdoust, F., & Noorani, I. (2026). Time-varying volatility model equipped with regime switching factor: Valuation of option price written on energy futures. Mathematics and Computers in Simulation, 241, 844–867. https://doi.org/10.1016/j.matcom.2025.10.0230378-4754https://hdl.handle.net/11073/3330110.1016/j.matcom.2025.10.023enhttps://doi.org/10.1016/j.matcom.2025.10.023oai:repository.aus.edu:11073/333012026-04-21T05:58:58Z |
| spellingShingle | Time-varying volatility model equipped with regime switching factor: valuation of option price written on energy futures Leduc, Guillaume Energy markets EM algorithm Option pricing Regime switching model |
| status_str | publishedVersion |
| title | Time-varying volatility model equipped with regime switching factor: valuation of option price written on energy futures |
| title_full | Time-varying volatility model equipped with regime switching factor: valuation of option price written on energy futures |
| title_fullStr | Time-varying volatility model equipped with regime switching factor: valuation of option price written on energy futures |
| title_full_unstemmed | Time-varying volatility model equipped with regime switching factor: valuation of option price written on energy futures |
| title_short | Time-varying volatility model equipped with regime switching factor: valuation of option price written on energy futures |
| title_sort | Time-varying volatility model equipped with regime switching factor: valuation of option price written on energy futures |
| topic | Energy markets EM algorithm Option pricing Regime switching model |
| url | https://hdl.handle.net/11073/33301 |