Send me a PM.Might be able to hook you up.

<t>Do you need the greeks? The answer to this question will drive which price dynamic model works.Also, estimating parameters in power markets is not the convenient thing to do and even the most complicated of spot models might not have any impact on the final pricing of the asset.Basically, I would...

Pretty hard to do for the reasons you mentioned.Even more so if there is asset operation behind the trading, which basically deep six'd a lot of traction around coming up with a solution.So, good luck.

Cool. Basically a good place to start is with Clewlow and Strickland's "A MultiFactor Model for Energy Derivatives". FEA has some white papers that seem to play around with the same idea.I must warn you that parsimony pays off if you are worried about calculating the greeks, too.

<t>If you are looking for closed form approaches, then there are various papers out there but almost surely no one uses them in practice. However, if you are after simulation based methods, then PCA is a decent start and be modified to fit observed option values. Let me know if this is what you are ...

QuoteOriginally posted by: twI'm also intruiged now. Does anyone know what a reverse CSO is?I always thought that the interesting instrument for gas (or any storage) pricing is a forward start CSO.See my earlier reply

Pretty certain this is just Forward and Backward Optimization.Look for a paper by Joe W. Byers for the LP approach.

<t>QuoteOriginally posted by: MF01 There are two functions used in the swing pricing program ,exercise and merge_updown functions ..I could not find these in the appendix for the chapter, do these exist in the book ?Okay, does anyone have Dorr's code, used in this book, for exercise.m and merge_updo...

@ kim...exactly what I had in mind.@list: 1) i agree, but this is a actually a product with $$ behind it.

Looking at valuing the following payoff (such that t<T):Using something like conditioning on S(t) seems to be the best idea, but open to any others.

<t>PFE is going to be pretty dirty as it is for power and gas.However, I would not use EWMA and use the historical data with corrections as needed.Keep in mind that if you do PFE over a long time horizon you will need to change your process.I would keep away from Garch etc and in place look at mean-...

<t>Basically, I am attempting to compute the expected value of a conditional probability by first numerically integrating and then updating the conditional values etc (mv-normal dist model here). However, given that I am integrating first then computing the conditional values I am not certain that t...

QuoteOriginally posted by: rich7804AFAIK ICAP has daily vol quotes not spotYup, good call.

<t>QuoteOriginally posted by: rich7804Where do you even get Spot Vols? Are these historical estimates? " if I use a weighted average of forward and spot volatilities for power and gas in simulating the intra-month price paths, the resulting option price is much closer to the market quotes" What kind...

<t>Well, how much trust do you have in the spot vols? Generally, either blended or forward vols are good estimates, since spot quotes are going to be very nosiy.Also, pay attention to the impact of correlation, which might lead to a break down in your valuation model. Aside from a Real Option Approa...