Valuation of electricity swing options by multistage stochastic programming
Journal
Automatica: a journal of IFAC
ISSN
0005-1098
ISSN-Digital
1873-2836
Type
journal article
Date Issued
2009-04-01
Author(s)
Abstract
Electricity swing options are Bermudan-style path-dependent derivatives on electrical energy. We consider an electricity market driven by several exogenous risk factors and formulate the pricing problem for a class of swing option contracts with energy and power limits as well as ramping constraints. Efficient numerical solution of the arising multistage stochastic program requires aggregation of decision stages, discretization of the probability space, and reparameterization of the decision space. We report on numerical results and discuss analytically tractable limiting cases.
Language
English
Keywords
Stochastic programming
Model approximation
Discretization
Energy
Finance
Swing option
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Elsevier Science
Publisher place
Oxford [u.a.]
Volume
45
Number
4
Start page
889
End page
899
Pages
11
Subject(s)
Division(s)
Eprints ID
52991
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open.access
Name
Valuation of Electricity Swing Options.pdf
Size
267.59 KB
Format
Adobe PDF
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