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Evaluating Energy Sector Investments: Calculating Volatility

Author

Listed:
  • Edson de Oliveira Pamplona
  • Marina Carvalho Brandão
  • José Arnaldo Barra Montevechi
  • Alexandre Ferreira de Pinho
  • Valério Oscar Albuquerque
  • Paulo Rotela Junior

Abstract

A major task in assessing risks of investment projects is defining the approach to calculating the project’s volatility. Looking at assorted estimation techniques, this paper calculates their volatilities. The techniques originate from authors in the area and involve project-specific variables of uncertainty. These techniques are applied to a case of electricity distribution through real options. Results are then compared. The difference between the calculated volatilities was low, leaving, in the case of the project evaluated here, the decision unchanged. The paper’s contribution consists of providing a detailed presentation of calculating volatility by the methods cited and by comparing the results obtained by its application.

Suggested Citation

  • Edson de Oliveira Pamplona & Marina Carvalho Brandão & José Arnaldo Barra Montevechi & Alexandre Ferreira de Pinho & Valério Oscar Albuquerque & Paulo Rotela Junior, 2013. "Evaluating Energy Sector Investments: Calculating Volatility," Mathematical Problems in Engineering, Hindawi, vol. 2013, pages 1-9, December.
    • Handle: RePEc:hin:jnlmpe:128309
    DOI: 10.1155/2013/128309
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