Pricing of Electricity Swing Options

Topics:
Investment and Capital Markets
Tags:
Electricity,
Marketing,
Marketing Research,
Option,
Pricing,
Pricing Strategy,
University Of Michigan
Source:
University of Michigan

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Overview: This paper considers the pricing of electricity swing options that hedge the electricity price risk and also partly hedge the risks in the option owner's electricity consumption process. The swing derivative sets instantaneous and cumulative boundaries for the electricity consumption and it specifies the price at which the buyer can buy energy. The paper shows that the swing option can be priced and hedged with regular electricity forwards and call options.

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Format: PDF | Size: 238KB | Date: Jan 2004 | Pages: 44

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