Publication

A Software Tool for the Valuation and Optimal Exercise of Swing Options

2003
Reports

Abstract

Electricity swing options represent a special kind of American-style path dependent power derivatives. Thus, valuation of a swing option is inevitably linked to the determination of an optimal excercise strategy up to the end of the option's exercise period. In cooperation with a major European power producer and trader, this project deals with swing option valuation by means of a special multistage stochastic programming approach: a software tool was developed and implemented which accomplishes the requirements of a trading department with respect to pricing accuracy, run-time behaviour and handling comfort.

Official source

https://infoscience.epfl.ch/entities/publication/2e733b31-48ce-4a49-8f67-b81425a4518b

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2003
Reports

Abstract

Official source

https://infoscience.epfl.ch/entities/publication/2e733b31-48ce-4a49-8f67-b81425a4518b

About this result

Related concepts (21)

Electricity market

In a broad sense, an electricity market is a system that facilitates the exchange of electricity-related goods and services. During more than a century of evolution of the electric power industry, the economics of the electricity markets had undergone enormous changes for reasons ranging from the technological advances on supply and demand sides to politics and ideology.

Cost of electricity by source

Different methods of electricity generation can incur a variety of different costs, which can be divided into three general categories: 1) wholesale costs, or all costs paid by utilities associated with acquiring and distributing electricity to consumers, 2) retail costs paid by consumers, and 3) external costs, or externalities, imposed on society. Wholesale costs include initial capital, operations & maintenance (O&M), transmission, and costs of decommissioning.

Option style

In finance, the style or family of an option is the class into which the option falls, usually defined by the dates on which the option may be exercised. The vast majority of options are either European or American (style) options. These options—as well as others where the payoff is calculated similarly—are referred to as "vanilla options". Options where the payoff is calculated differently are categorized as "exotic options". Exotic options can pose challenging problems in valuation and hedging.