Talks in the Summer Term 2016

Talks in the summer term 2016 normally will take place on wednesdays in the time between 6pm and 7:30pm in room S06 S00 A21 at Campus Essen (Directions).


Dates and Lecturers:

Wednesday, 05/18/2016: Ass-Prof. Florentina Paraschiv (St. Gallen): Structural model for electricity forward prices


Wednesday, 05/25/2016: Prof. Massimo Marinacci (AXA-Bocconi Chair in Risk, Università Bocconi): Model uncertainty

Abstract: We discuss some two-stage decision models, Bayesian and not, that can cope with both state and model uncertainty


(Please note, that this talk will take place in room S06 S00 B32!)

Wednesday, 06/29/2016: Dr. Kay Pilz (RIVACON GmbH): Hybrid Market Models with Commodity and Interest Rate Risk and their Calibration

Abstract: Based on the multi-currency LIBOR Market Model (LMM)  a hybrid commodity interest rate market model is presented, with a time-dependent stochastic local volatility function allowing the model to simultaneously fit the implied volatility surfaces of commodity and interest rate options. A procedure for efficiently calibrating the model to interest rate and commodity volatility smiles is constructed. The talk focuses on two of the building blocks of the calibration procedure. 

Firstly, since liquid market prices are in most cases only available for options on commodity futures, rather than forwards, a convexity correction formula for the model is derived to account for the difference between forward and futures prices.  Secondly, the fitting to an exogenously given correlation structure between forward interest rates and commodity prices (cross–correlation) is demonstrated. The calibration approach is demonstrated in an application to real market data for USD Libor rates and WTI crude oil futures.

Wednesday, 07/06/2016: Prof. Ralf Werner (Universität Augsburg) 

Mathematical foundation of replicating portfolios


In the last few years, the first theoretical foundations for replicating portfolios - probably the most prevailing technique for risk capital calculation in life insurance - have been given in a series of papers by Beutner, Pelsser and Schweizer. We complement this mainly asymptotic line of research on the approximation of the aggregated terminal value distribution under the risk neutral measure by several fundamental results concerning the overall effectiveness of the replicating portfolio approach.

We first prove that both replication by terminal value and by cash flow matching are consistent with the aim to obtain an accurate approximation not only to the aggregated terminal value distribution, but, more importantly, to an accurate approximation of the MCEV distribution after one period. In contrast to the existing literature, our results are not of asymptotic nature but provide exact bounds on the error of the approximation of the MCEV distribution and apply to both the risk neutral and the real world measure.

We further provide the missing link between the error in the MCEV distribution and the error in the resulting risk capital figure, by providing explicit bounds on the latter in terms of the former.

One important mathematical tool in our analysis is the observation that in discrete time, the measure change from the real world to the risk neutral measure can be both bounded below and above by a suitable constant in the first period.

Monday, 07/11/2016: Prof. Steven A. Gabriel (University of Maryland) (For more information on this talk please visit the Chair of Energy Economics)

A rolling- horizon approach for stochastic mixed complementarity problems with endogenous learning: Application to natural gas markets


In this paper we present a new rolling horizon approach for solving stochastic mixed complementarity problems (MCPs). Such a scheme allows for decision-dependent probabilities, endogenous learning and closer realism to energy market MCPs. We also introduce a new concept, the Value of the Rolling Horizon (VoRH) to measure the closeness of different rolling horizon schemes to a perfect foresight benchmark. Lastly, numerical results are presented with an application in natural gas markets to demonstrate the value of the proposed approach.

(Please note, that this talk will take place in room S06 S00 B32!)