Title : Spread, Swing, and Temperature Options: Mathematical Challenges


Rene Carmona

Operations Research & Financial Engineering Department
Princeton University


Abstract

The first part of the talk will review some of the traditional financial derivatives traded on the energy markets. In particular, we shall discuss the pricing and the hedging of temperature options and spark spreads. The second part of the talk will concentrate on the mathematical theory of instruments with multiple American exercises. This research effort is motivated by the widespread use of swing options, and the fact that despite the existence of several numerical investigations, no mathematical theory seems to be existing for these instruments.