IDEAS home Printed from https://ideas.repec.org/a/eee/eneeco/v25y2003i5p459-472.html
   My bibliography  Save this article

Real options and a large producer: the case of electricity markets

Author

Listed:
  • Keppo, Jussi
  • Lu, Hao

Abstract

No abstract is available for this item.

Suggested Citation

  • Keppo, Jussi & Lu, Hao, 2003. "Real options and a large producer: the case of electricity markets," Energy Economics, Elsevier, vol. 25(5), pages 459-472, September.
    • Handle: RePEc:eee:eneeco:v:25:y:2003:i:5:p:459-472
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0140-9883(03)00048-3
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Weeds, H., 1999. "Sleeping Patents and Computsory Licensing: An Options Analysis," The Warwick Economics Research Paper Series (TWERPS) 577, University of Warwick, Department of Economics.
    2. Pauli Murto & Jussi Keppo, 2002. "A Game Model Of Irreversible Investment Under Uncertainty," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 4(02), pages 127-140.
    3. Ioannis Karatzas & Fridrik M. Baldursson, 1996. "Irreversible investment and industry equilibrium (*)," Finance and Stochastics, Springer, vol. 1(1), pages 69-89.
    4. Dixit, Avinash K, 1989. "Entry and Exit Decisions under Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 620-638, June.
    5. Pindyck, Robert S, 1991. "Irreversibility, Uncertainty, and Investment," Journal of Economic Literature, American Economic Association, vol. 29(3), pages 1110-1148, September.
    6. Merton, Robert C., 1971. "Optimum consumption and portfolio rules in a continuous-time model," Journal of Economic Theory, Elsevier, vol. 3(4), pages 373-413, December.
    7. Vehvilainen, Iivo & Keppo, Jussi, 2003. "Managing electricity market price risk," European Journal of Operational Research, Elsevier, vol. 145(1), pages 136-147, February.
    8. Cuoco, Domenico & Cvitanic, Jaksa, 1998. "Optimal consumption choices for a 'large' investor," Journal of Economic Dynamics and Control, Elsevier, vol. 22(3), pages 401-436, March.
    9. Pindyck, Robert S, 1988. "Irreversible Investment, Capacity Choice, and the Value of the Firm," American Economic Review, American Economic Association, vol. 78(5), pages 969-985, December.
    10. Brennan, Michael J & Schwartz, Eduardo S, 1985. "Evaluating Natural Resource Investments," The Journal of Business, University of Chicago Press, vol. 58(2), pages 135-157, April.
    11. Merton, Robert C, 1969. "Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 247-257, August.
    12. Weeds, Helen & Mason, Robin, 2001. "Irreversible Investment with Strategic Interactions," CEPR Discussion Papers 3013, C.E.P.R. Discussion Papers.
    13. Cox, John C. & Huang, Chi-fu, 1989. "Optimal consumption and portfolio policies when asset prices follow a diffusion process," Journal of Economic Theory, Elsevier, vol. 49(1), pages 33-83, October.
    14. Grenadier, Steven R, 1996. "The Strategic Exercise of Options: Development Cascades and Overbuilding in Real Estate Markets," Journal of Finance, American Finance Association, vol. 51(5), pages 1653-1679, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Madlener, Reinhard & Kumbaroglu, Gurkan & Ediger, Volkan S., 2005. "Modeling technology adoption as an irreversible investment under uncertainty: the case of the Turkish electricity supply industry," Energy Economics, Elsevier, vol. 27(1), pages 139-163, January.
    2. Michele Moretto & Paolo M. Panteghini & Carlo Scarpa, 2008. "Profit sharing and investment by regulated utilities: A welfare analysis," Review of Financial Economics, John Wiley & Sons, vol. 17(4), pages 315-337, December.
    3. Tolis, Athanasios I. & Rentizelas, Athanasios A., 2011. "An impact assessment of electricity and emission allowances pricing in optimised expansion planning of power sector portfolios," Applied Energy, Elsevier, vol. 88(11), pages 3791-3806.
    4. de Bragança, Gabriel Godofredo Fiuza & Daglish, Toby, 2017. "Investing in vertical integration: electricity retail market participation," Energy Economics, Elsevier, vol. 67(C), pages 355-365.
    5. Tolis, Athanasios I. & Rentizelas, Athanasios A. & Tatsiopoulos, Ilias P., 2010. "Optimisation of electricity energy markets and assessment of CO2 trading on their structure: A stochastic analysis of the Greek Power Sector," Renewable and Sustainable Energy Reviews, Elsevier, vol. 14(9), pages 2529-2546, December.
    6. McInerney, Celine & Bunn, Derek, 2013. "Valuation anomalies for interconnector transmission rights," Energy Policy, Elsevier, vol. 55(C), pages 565-578.
    7. Romano, Teresa & Fumagalli, Elena, 2018. "Greening the power generation sector: Understanding the role of uncertainty," Renewable and Sustainable Energy Reviews, Elsevier, vol. 91(C), pages 272-286.
    8. Woo, C.K. & Zarnikau, J. & Moore, J. & Horowitz, I., 2011. "Wind generation and zonal-market price divergence: Evidence from Texas," Energy Policy, Elsevier, vol. 39(7), pages 3928-3938, July.
    9. Luukka, Pasi & Collan, Mikael, 2015. "New fuzzy insurance pricing method for giga-investment project insurance," Insurance: Mathematics and Economics, Elsevier, vol. 65(C), pages 22-29.
    10. Kumbaroglu, Gürkan & Madlener, Reinhard & Demirel, Mustafa, 2008. "A real options evaluation model for the diffusion prospects of new renewable power generation technologies," Energy Economics, Elsevier, vol. 30(4), pages 1882-1908, July.
    11. Wickart, Marcel & Madlener, Reinhard, 2007. "Optimal technology choice and investment timing: A stochastic model of industrial cogeneration vs. heat-only production," Energy Economics, Elsevier, vol. 29(4), pages 934-952, July.
    12. Collan, Mikael, 2004. "Giga-Investments: Modelling the Valuation of Very Large Industrial Real Investments," MPRA Paper 4328, University Library of Munich, Germany.
    13. Lee, Shun-Chung & Shih, Li-Hsing, 2010. "Renewable energy policy evaluation using real option model -- The case of Taiwan," Energy Economics, Elsevier, vol. 32(Supplemen), pages 67-78, September.
    14. Cartea, Álvaro & González-Pedraz, Carlos, 2012. "How much should we pay for interconnecting electricity markets? A real options approach," Energy Economics, Elsevier, vol. 34(1), pages 14-30.
    15. Woo, Chi-Keung & Horowitz, Ira & Olson, Arne & Horii, Brian & Baskette, Carmen, 2006. "Efficient frontiers for electricity procurement by an LDC with multiple purchase options," Omega, Elsevier, vol. 34(1), pages 70-80, January.
    16. Lin, Tyrone T. & Huang, Shio-Ling, 2011. "Application of the modified Tobin's q to an uncertain energy-saving project with the real options concept," Energy Policy, Elsevier, vol. 39(1), pages 408-420, January.
    17. Sezgen, Osman & Goldman, C.A. & Krishnarao, P., 2007. "Option value of electricity demand response," Energy, Elsevier, vol. 32(2), pages 108-119.
    18. Blyth, William & Bunn, Derek & Chronopoulos, Michail & Munoz, Jose, 2014. "Systematic Analysis of the Evolution of Electricity and Carbon Markets under Deep Decarbonisation," Discussion Papers 2014/39, Norwegian School of Economics, Department of Business and Management Science.
    19. Dominik Kryzia & Michał Kopacz & Katarzyna Kryzia, 2020. "The Valuation of the Operational Flexibility of the Energy Investment Project Based on a Gas-Fired Power Plant," Energies, MDPI, vol. 13(7), pages 1-16, March.
    20. Lin, Tyrone T. & Huang, Shio-Ling, 2010. "An entry and exit model on the energy-saving investment strategy with real options," Energy Policy, Elsevier, vol. 38(2), pages 794-802, February.
    21. Briest, Gordon & Lauven, Lars-Peter & Kupfer, Stefan & Lukas, Elmar, 2022. "Leaving well-worn paths: Reversal of the investment-uncertainty relationship and flexible biogas plant operation," European Journal of Operational Research, Elsevier, vol. 300(3), pages 1162-1176.
    22. Tolis, Athanasios & Doukelis, Aggelos & Tatsiopoulos, Ilias, 2010. "Stochastic interest rates in the analysis of energy investments: Implications on economic performance and sustainability," Applied Energy, Elsevier, vol. 87(8), pages 2479-2490, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Suresh M. Sundaresan, 2000. "Continuous‐Time Methods in Finance: A Review and an Assessment," Journal of Finance, American Finance Association, vol. 55(4), pages 1569-1622, August.
    2. Miao, Jianjun & Wang, Neng, 2007. "Investment, consumption, and hedging under incomplete markets," Journal of Financial Economics, Elsevier, vol. 86(3), pages 608-642, December.
    3. Wang, Tan, 2001. "Equilibrium with new investment opportunities," Journal of Economic Dynamics and Control, Elsevier, vol. 25(11), pages 1751-1773, November.
    4. Lander, Diane M. & Pinches, George E., 1998. "Challenges to the Practical Implementation of Modeling and Valuing Real Options," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(3, Part 2), pages 537-567.
    5. Luis H. R. Alvarez & Erkki Koskela, 2002. "Irreversible Investment under Interest Rate Variability: New Results," CESifo Working Paper Series 640, CESifo.
    6. E. Nasakkala & J. Keppo, 2008. "Hydropower with Financial Information," Applied Mathematical Finance, Taylor & Francis Journals, vol. 15(5-6), pages 503-529.
    7. Tsekrekos, Andrianos E., 2010. "The effect of mean reversion on entry and exit decisions under uncertainty," Journal of Economic Dynamics and Control, Elsevier, vol. 34(4), pages 725-742, April.
    8. Lim, Terence & Lo, Andrew W. & Merton, Robert C. & Scholes, Myron S., 2006. "The Derivatives Sourcebook," Foundations and Trends(R) in Finance, now publishers, vol. 1(5–6), pages 365-572, April.
    9. Bulan, Laarni & Mayer, Christopher & Somerville, C. Tsuriel, 2009. "Irreversible investment, real options, and competition: Evidence from real estate development," Journal of Urban Economics, Elsevier, vol. 65(3), pages 237-251, May.
    10. Jianjun Miao & Neng Wang, 2004. "Investment, Hedging, and Consumption Smoothing," Finance 0407014, University Library of Munich, Germany.
    11. Kyoung Jin Choi & Hyeng Keun Koo & Do Young Kwak, 2004. "Optimal Stopping of Active Portfolio Management," Annals of Economics and Finance, Society for AEF, vol. 5(1), pages 93-126, May.
    12. Murto, Pauli & Nasakkala, Erkka & Keppo, Jussi, 2004. "Timing of investments in oligopoly under uncertainty: A framework for numerical analysis," European Journal of Operational Research, Elsevier, vol. 157(2), pages 486-500, September.
    13. Pindyck, Robert S, 1991. "Irreversibility, Uncertainty, and Investment," Journal of Economic Literature, American Economic Association, vol. 29(3), pages 1110-1148, September.
    14. Grenadier, Steven R. & Wang, Neng, 2007. "Investment under uncertainty and time-inconsistent preferences," Journal of Financial Economics, Elsevier, vol. 84(1), pages 2-39, April.
    15. Jouini, Elyes, 2001. "Arbitrage and control problems in finance: A presentation," Journal of Mathematical Economics, Elsevier, vol. 35(2), pages 167-183, April.
    16. Caren Sureth, 2002. "Partially Irreversible Investment Decisions and Taxation under Uncertainty: A Real Option Approach," German Economic Review, Verein für Socialpolitik, vol. 3(2), pages 185-221, May.
    17. Alvarez, Luis H.R., 2011. "Optimal capital accumulation under price uncertainty and costly reversibility," Journal of Economic Dynamics and Control, Elsevier, vol. 35(10), pages 1769-1788, October.
    18. Dixit, Avinash, 1995. "Irreversible investment with uncertainty and scale economies," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 327-350.
    19. Lambrecht, Bart M., 2017. "Real options in finance," Journal of Banking & Finance, Elsevier, vol. 81(C), pages 166-171.
    20. Ioannis Kyriakou & Panos K. Pouliasis & Nikos C. Papapostolou & Nikos K. Nomikos, 2018. "Income uncertainty and the decision to invest in bulk shipping," European Financial Management, European Financial Management Association, vol. 24(3), pages 387-417, June.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:25:y:2003:i:5:p:459-472. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eneco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.