IDEAS home Printed from https://ideas.repec.org/a/rsk/journ2/2160750.html
   My bibliography  Save this article

Valuation of commodity-based swing options

Author

Listed:
  • Rudiger Kiesel, Jochen Gernhard, Sven-Olaf Stoll

Abstract

ABSTRACT It is often necessary to structure time-varying demand for energy sources such as electricity or fuel coming from, on the one hand, seasonal variations and, on the other hand, from unexpected variations in production. This results in the need for some structural flexibility in delivery contracts of the energy sources. A special type of option was therefore introduced: the so-called swing option.We consider the valuation of a type of swing option with a recovery time which is widely used on the oil market.We develop a least-squares Monte Carlo approach suitable for such swing options with recovery time, whereby we allow different recovery-time constraints. Using a standard model for the oil price, we present some numerical results and compare the performance of the least-squares Monte Carlo approach with a finite-difference approach.

Suggested Citation

Handle: RePEc:rsk:journ2:2160750
as

Download full text from publisher

File URL: https://www.risk.net/system/files/import/protected/digital_assets/4583/jem_v3n3a4.pdf
Download Restriction: no
---><---

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:rsk:journ2:2160750. 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.

We have no bibliographic references for this item. You can help adding them by using 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: Thomas Paine (email available below). General contact details of provider: https://www.risk.net/journal-of-energy-markets .

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.