Swing Option Pricing Under The Jump Diffusion Process

In the current financial market,the majority of the underlying assets of financial derivatives are based on financial products. We are considering energy as our underlying asset of option derivatives in this paper. In the market of energy, especially for electricity and nature gas, many contracts incorporate flexibility-of-delivery options such as swing option, owing to the characteristics of electricity and other energy. Due to the regular daily restrictions, these contracts allow the holders to repeatedly execute the power of obtaining energy more or less. We exact the marketing price on the basis of the previous forward contracts as well as other relevant information, in order to describe energy price by a single-factor stochastic process and to establish a single-factor model about swing option ultimately. Moreover, with the purpose of making our model in line with the rules of fluctuating market which has all sorts of risks, we would like to consider adding separate compound Poisson process as jump element whose jumping width follows double exponential distribution on the foundation of a single-factor model. Finally, we will run the numerical simulation according to the data generated by the model of using finite difference method.