Analysis of Contract-for-Difference with Vasicek Process and Cointegrated System in Stock Market and Nordic Electricity Market

Abstract

This thesis aims at pricing Contract-for-Difference (CFD) in stock market, and Electricity Price Area Differential (EPAD) in the Nord Pool. For CFD, our model consists of Geometric Brownian Motion and Vasicek process. For EPAD, we apply cointegrated system to build a model, with and without Vasicek process. Both parts claim calculable results. And they are given by a series of analysis- and calculation-work. Reader will also encounter some figures of simulation by R.