Takashi Kanamura
Articles by this Author
A supply and demand based volatility model for energy prices
- By Takashi Kanamura
- Published 08/7/2009
- Price modeling
- Unrated
This paper proposes a new volatility model for energy prices using the supply–demand relationship, which we call a supply and demand based volatility model. We show that the supply curve shape in the model determines the characteristics of the volatility in energy prices. It is found that the inverse Box–Cox transformation supply curve reflecting energy markets causes the inverse leverage effect, i.e., positive
correlation between energy prices and volatility.
The model is also used to show that an existing (G)ARCH-M model has the foundations on the supply–demand relationship. Additionally, we conduct the empirical studies analyzing the volatility in the U.S. natural gas prices.
Pricing summer day options by good-deal bounds
- By Takashi Kanamura
- Published 08/7/2009
- Valuation
- Unrated
Published in: Energy Economics
Publication year: 2008
Co-author 1: Kazuhiko Ohashi
Despite the worldwide popularity of CDD- and HDD-type weather derivatives based on temperature, a different class of weather derivatives, so-called summer day options, is more popular in Japan; the payoffs are determined by the number of summer days (i.e., the days whose average temperature is above 25 °C) during the contract period.
In this paper, we price such summer day options by the good-deal bounds of Cochrane and Saa-Requejo [Cochrane, J.H., and J. Saa-Requejo, 2000, Beyond Arbitrage: Good-Deal Asset Price Bounds in Incomplete Markets, Journal of Political Economy 108, 79–119.], using temperature data for Tokyo
.
