81625 - Advanced Topics In Quantitative Methods In Finance

Course Unit Page


This teaching activity contributes to the achievement of the Sustainable Development Goals of the UN 2030 Agenda.

Quality education

Academic Year 2020/2021

Learning outcomes

The aim is to implement the knowledge achieved in the advanced quantitative methods by working on a business problem that is proposed in cooperation with a local industry partner. The course includes an off- and onsite introduction to the theoretical background needed to work out the proposed case study, and a phase of team work.

Course contents

This course is reserved to the QF master students who results to be the winners of the dedicated call for application.

The strategic role of the energy sector in the development of the world economy and the arguments concerning his sustainability deserves a deep knowledge of this market in order to recognize the social and political relevance of the risks involved. For instance, the possibility of extreme price movements contributes to increase the risk of trading in electricity markets. Moreover, a number of standard financial tools cannot be readily applied to pricing and hedging electricity derivatives because of the peculiarities of this commodity. The program shall provide a thorough understanding of energy industry fundamentals; it shall examine economics, environmental and social policies as well as the impact of technological change on the future role of energy in the global economy.

Therefore, this intensive programme aims to provide students critical skills to be able to understand key concepts and tools to analyse energy sector and markets. In particular, students will deepen their knowledge of key technical and quantitative tools and topics in energy policy, business and green energy finance to address several issues concerning the energy market.

Intensive Programme schedule:

Dott. Andrea Bianchi, Hera Spa. industrial Partner

  • Introduction of Hera Spa and projects' assignment
  • Presentation/discussion of the projects

Prof. Tiziano Vargiolu, University of Padua.

  • Quantitative methods for Energy market

Dott. Giacomo Maria Bressan, Sustainanalytics

Part 1: Introduction to Matlab

  • Software overview;
  • Variables and plots;
  • Import tool;
  • Vectors and matrices (creation, indexing, manipulation, functions);
  • Data import from readtable and data cleaning;
  • Example: stock prices import, basic manipulation and visualization;
  • Dates and times;
  • Tables (extraction, indexing, manipulation, function handles);
  • Scripts and functions;
  • Loops (if, for, while);
  • Examples: understanding loops
  • Random variables;
  • Stochastic processes;
  • Example: simulating stock prices;
  • Model fitting: interpolation and prediction;
  • Example: fitting interest rate curve;
  • Debugging code;
  • Working with the code: repositories and sharing.

Part 2: Derivatives pricing in Matlab

  • Derivatives: an introduction;
  • Derivatives pricing;
  • Option pricing in Matlab: built-in functions and Monte Carlo method;
  • Example: pricing with Black Scholes model (possibly on real data);
  • Example: volatility surface (possibly on real data);
  • Example: pricing call and Asian options in Matlab.

Part 2b: Advanced derivatives

  • An introduction to copula functions;
  • Basket options: theory and examples;
  • Example: pricing basket options with copulas (https://nl.mathworks.com/help/finance/pricing-american-basket-options-by-monte-carlo-simulation.html).

Part 3: Modelling electricity price in Matlab

  • Electricity prices: features;
  • Mean reversion & seasonality: the OU process;
  • Example: calibration of OU process on temperature data;
  • Jump processes: an introduction;
  • Market price of risk: concept;
  • Modelling electricity prices: mean reversion and jump diffusion;
  • Example: simulating (daily) electricity prices.

Part 4: Further applications in the energy market

  • Option 1: real option valuation (power plant, without dispatching schedule); https://nl.mathworks.com/company/newsletters/articles/real-options-valuation-with-matlab-a-mining-economics-case-study.html
  • Option 2: valuation and risk for a power plant, considering dispatching schedule; https://nl.mathworks.com/matlabcentral/fileexchange/28056-energy-trading-risk-management-with-matlab-webinar-case-study

Possible extra topics

  • Credit derivatives;
  • Interest rates derivatives;
  • Weather derivatives;
  • Risks application: https://nl.mathworks.com/company/newsletters/articles/7-financial-risks-modeled-in-matlab.html (especially correlated default using copulas).


E. Edoli, S. Fiorenzani, T. Vargiolu. Optimization methods in gas and power markets. Palgrave MacMillan 2016

Teaching methods

This Intensive Programme is a unique opportunity to take part in an international event, to deepen your knowledge on current challenges for energy markets, to work in contact with an important financial company and to experiment professional group work in a multinational team.

The course is organized in the form of a workshop including both lectures and tutorials offered by local teachers and distinguished guest experts. The classes will provide students both a theoretical and methodological background to analyse the relation between energy markets and climate-related financial risks triggered from technological and policy shocks involving the energy sector. In particular, by attending the classes students will acquire an understanding on the key challenges for energy markets in the low-carbon transition, of the institutional actors involved (including policy makers, private and public financial institutions, financial regulators) and the policies discussed (e.g. the so-called “carbon-tax”). Further it will introduce students to state-of-the-art financial metrics and methods to assess the economic and financial implications (in terms of business models and portfolios’ management strategies) of climate risks and climate policies for the energy sector.

Intercultural learning will be an integral part of the onsite local course experience. In addition to the diversity of the case group, consisting of students that will represent each of the four participating higher education institutions, a local expert will provide an input into topics such as cross cultural training, intercultural stimulation, cultural awareness training, and how to work in international teams.

Assessment methods

Students will be evaluated through a test concerning the two theoretical/methodological lectures. They will receive a score out of 30 Points.

Moreover the students will be evaluated in the project teamwork. A commission composed by the person having in charge the programme and a representative person of the industrial partner will evaluate the oral presentation of the project. A score out of 30 points will be assigned.

The final score will be evaluated as the weighted mean of the individual tests (30%) and the teamwork (70%)

Teaching tools

Teaching tools concerning the theoretical lessons will be blackboard and slides. On the other hand the methodological lectures, aiming to the implementation of the team project, will be organized in the computer lab.

Office hours

See the website of Silvia Romagnoli