We present a detailed description of storage options valuation using a multilevel tree methodology which takes into account both the stochastic evolution of the energy commodity price underlying the storage contract or asset, as well as the storage facility operational constraints. We derive also a quasi-analytical solution for the storage value as a strip of calendar spread options, which is applicable when the storage constraints are ignored. The two valuation methodologies are applied within the framework of a one-factor and a two-factor diffusion model for the commodity price. As an interesting example of a path-dependent option with American exercise style, we take a look at the storage option injection and withdrawal exercise price boundaries and examine how these exercise decision boundaries are influenced by variations in the model's input parameters. We provide numerical results illustrating the dependence of the storage option value on the price model parameters, and interpret the observed parameter dependence using the calendar spreads formula as a useful analysis tool. We analyze and present numerical results regarding the dependence of the option value on the storage operational parameters.

We present a class of multi-factor stochastic models for energy futures prices, similar to the interest rate futures models recently formulated by Heath. We do not postulate directly the risk-neutral processes followed by futures prices, but define energy futures prices in terms of a spot price, not directly observable, driven by several stochastic factors. Our formulation leads to an expression for futures prices which is well suited to the application of Kalman filtering techniques together with maximum likelihood estimation methods. Based on these techniques, we perform an empirical study of a one- and a two-factor model for futures prices for natural gas.

Following Witten, [Commun. Math. Phys. 21, 351–399 (1989)] we approach the Abelian quantum Chern–Simons (CS) gauge theory from a Feynman functional integral point of view. We show that for 3-manifolds with and without a boundary the formal functional integral definitions lead to mathematically proper expressions that agree with the results from the rigorous construction [J. Math. Phys. 39, 170–206 (1998)] of the Abelian CS topological quantum field theory via geometric quantization.

We give a construction of the Abelian Chern–Simons gauge theory from the point of view of a 2+1-dimensional topological quantum field theory. The definition of the quantum theory relies on geometric quantization ideas that have been previously explored in connection to the non-Abelian Chern–Simons theory [J. Diff. Geom. 33, 787–902 (1991); Topology 32, 509–529 (1993)]. We formulate the topological quantum field theory in terms of the category of extended 2- and 3-manifolds introduced in a preprint by Walker in 1991 and prove that it satisfies the axioms of unitary topological quantum field theories formulated by Atiyah [Publ. Math. Inst. Hautes Etudes Sci. Pans 68, 175–186 (1989)].

We apply the geometric quantization method with real polarizations to the quantization of a symplectic torus. By quantizing with half-densities we canonically associate to the symplectic torus a projective Hilbert space and prove that the projective factor is expressible in terms of the Maslov-Kashiwara index. As in the quantization of a linear symplectic space, we have two ways of resolving the projective ambiguity: (i) by introducing a metaplectic structure and using half-forms in the definition of the Hilbert space; (ii) by choosing a 4-fold cover of the Lagrangian Grassmannian of the linear symplectic space covering the torus. We show that the Hilbert space constructed through either of these approaches realizes a unitary representation of the integer metaplectic group.

We give a construction of the abelian Chern-Simons gauge theory from the point of view of a 2+1 dimensional topological quantum field theory. The definition of the quantum theory relies on geometric quantization ideas which have been previously explored in connection to the nonabelian Chern-Simons theory [JW,ADW]. We formulate the topological quantum field theory in terms of the category of extended 2- and 3-manifolds introduced by Walker [Wa] and prove that it satisfies the axioms of unitary topological quantum field theories formulated by Atiyah [A1].