Risk Minimizing Option Pricing in a Semi-Markov Modulated Market

We address risk minimizing option pricing in a semi-Markov modulated market where the floating interest rate depends on a finite state semi-Markov process. The growth rate and the volatility of the stock also depend on the semi-Markov process. Using the Föllmer–Schweizer decomposition we find the locally risk minimizing price for European options and the corresponding hedging strategy. We develop suitable numerical methods for computing option prices.

Portfolio Optimization in a Semi-Markov Modulated Market

We address a portfolio optimization problem in a semi-Markov modulated market. We study both the terminal expected utility optimization on finite time horizon and the risk-sensitive portfolio optimization on finite and infinite time horizon. We obtain optimal portfolios in relevant cases. A numerical procedure is also developed to compute the optimal expected terminal utility for finite horizon problem.

Asymptotic analysis of option pricing in a Markov modulated market

We address asymptotic analysis of option pricing in a regime switching market where the risk free interest rate, growth rate and the volatility of the stocks depend on a finite state Markov chain. We study two variations of the chain namely, when the chain is moving very fast compared to the underlying asset price and when it is moving very slow. Using quadratic hedging and asymptotic expansion, we derive corrections on the locally risk minimizing option price.

Relative electrical distance concept for evaluation of network reactive power and loss contributions in a deregulated system

With the liberalisation of electricity market it has become very important to determine the participants making use of the transmission network.Transmission line usage computation requires information of generator to load contributions and the path used by various generators to meet loads and losses. In this study relative electrical distance (RED) concept is used to compute reactive power contributions from various sources like generators, switchable volt-amperes reactive(VAR) sources and line charging susceptances that are scattered throughout the network, to meet the system demands. The transmission line charge susceptances contribution to the system reactive flows and its aid extended in reducing the reactive generation at the generator buses are discussed in this paper. Reactive power transmission cost evaluation is carried out in this study. The proposed approach is also compared with other approaches viz.,proportional sharing and modified Y-bus.Detailed case studies with base case and optimised results are carried out on a sample 8-bus system. IEEE 39-bus system and a practical 72-bus system, an equivalent of Indian Southern grid are also considered for illustration and results are discussed.