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In this study we consider the pricing of energy derivatives when theevolution of spot prices is modeled with a normal tempered stable drivenOrnstein-Uhlenbeck process. Such processes are the generalization of normalinverse Gaussian processes that are widely used in energy finance applications.We first specify their statistical properties calculating their characteristicfunction in closed form. This result is instrumental for the derivation ofnon-arbitrage conditions such that the spot dynamics is consistent with theforward curve without relying on numerical approximations or on numericalintegration. Moreover, we conceive an efficient algorithm for the exactgeneration of the trajectories which gives the possibility to implement MonteCarlo simulations without approximations or bias. We illustrate theapplicability of the theoretical findings and the simulation algorithms in thecontext of the pricing of different contracts, namely, strips of daily calloptions, Asian options with European style and swing options. Finally, wepresent an extension to future markets.

Normal Tempered Stable Processes and the Pricing of Energy Derivatives