Pricing Energy Derivatives

SciComp offers two solutions for pricing energy derivatives, SciFinance and Custom Fit Pricing Models .

SciFinance is an automated coding technology for rapidly developing derivatives pricing and risk models. SciFinance models can be created by simply modifying one of hundreds of model specifications provided with the system or by writing a model specification comprised of arbitrary partial differential equation (PDE) or stochastic differential equation (SDE), numerical algorithms and the use of key words. SciFinance does the rest by automating the programming task via the SciPDE and SciMC modules to produce fully documented C/C++/CUDA source code or Excel spreadsheets and add-ins.

SciComp Custom Fit Pricing Models meet the needs of users looking for "off-the-shelf" energy derivative pricing and risk models as well as those seeking a customized model approach that captures particular instrument features and modeling needs. Custom Fit Pricing Models are state-of-the-art energy derivative pricing and risk models comparable to those found on the desks of traders and risk managers within Tier-1 financial organizations. Like SciFinance, Custom Fit Pricing Models support the modeling of any financial instrument that can be priced using a PDE or SDE and the deliverable may include a ready-to-use Excel add-in or C/C++/CUDA source code pricing library.

SciComp's modeling flexibility and transparency provides:

• Support for any energy derivative (including sensitivity to any model parameter) that can be priced using a PDE or SDE
• Support for both market standard and proprietary pricing models
• Robust calibration routines
• Pricing model C/C++/CUDA source code

Pricing models for energy derivatives

SciComp solutions support any energy derivative pricing model that can be expressed as an SDE or PDE and no list can be complete (partial list below).

• Schwartz (1997)
• Gabillon (1991)
• CEV (including time dependence)
• Stochastic volatility model
  • Heston, Hull & White, etc,
  • Arbitrarily user defined
• Stochastic volatility with asset jumps
  • Bates, etc.
  • Arbitrarily user defined
• Stochastic volatility with asset and volatility jumps (SVJJ)
  • Matytsin
  • Duffy, Singleton and Pan
• Arbitrarily user defined
• Features include:
  • Stochastic volatility extensions
  • Jump extensions

Energy derivatives model calibration

SciCalibrator is an automated coding technology for translating calibration specifications into C/C++ source code calibration routines and ready-to-use, standalone Calibration Spreadsheets.

Calibration routines for energy derivative models include:

• Above mentioned models
• Other single and multi-factor spot rate models
• Other single and multi-factor term structure models
• Features include:
  • Underlying calibration instruments can be priced either with analytical pricing models (SciComp or end user provided) or by connecting synthesized PDE or MC models to the calibration engine

Energy derivative structures

Given that SciComp solutions support the modeling of any energy derivative that can be priced with a PDE or SDE and no list can be complete (partial list below).

• European Options
• American Options
• Commodity Swaps
• European Commodity Swaptions
• Bermudan Commodity Swaptions
• Exchange Options
• Commodity Spread Options
• Average Price Options
• Barrier Options
• Hybrid Basket Contracts
• Swing and Take-Or-Pay Contracts

Option types include:

• European
• Bermudan
• American
• Path dependent
• Barrier