The stochastic mesh method to price swing contracts

Our first seminar of 2014/15 will be held as a special event inside the Opening Day of the Doctoral School (15:00 - 1A150)

Wednesday 5 November 2014, h.15:45, room 1A150
Matteo Basei (Padova, Dip. Mat.)
"The stochastic mesh method to price swing contracts"

Abstract
This talk is based on the results achieved during a six-month internship in the Risk Department of a leading energy company. Our goal is twofold: on the one hand we give a brief survey on the problem of pricing swing contracts by the stochastic mesh method, on the other hand we describe our experience in the use of advanced mathematics in a private company.
Firstly, we consider the case of American options and study the original formulation of the stochastic mesh method, introduced by Broadie and Glasserman in 1997. Secondly, we try to improve the method by optimally calibrating the parameters, by a literature review and by the use of variance reduction techniques. Finally, we use the revised method to price swing options in energy markets.