English, Article edition: A REAL OPTIONS APPROACH FOR PRICING ELECTRICITY TOLLING AGREEMENTS SHI-JIE DENG; ZHENDONG XIA

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Bookmark: http://trove.nla.gov.au/version/36354
Physical Description
  • article
Language
  • English

Edition details

Title
  • A REAL OPTIONS APPROACH FOR PRICING ELECTRICITY TOLLING AGREEMENTS
Author
  • SHI-JIE DENG
  • ZHENDONG XIA
Physical Description
  • article
Notes
  • An electricity tolling agreement (or, tolling contact) is a supply contract in which the buyer reserves the right to take the output of an underlying electricity generation asset by paying a predetermined premium to the asset owner. We propose a real options approach to value a tolling contract incorporating operational characteristics of the generation asset and contractual constraints. Dynamic programming and value function approximation by Monte Carlo based least-squares regression are employed to solve the valuation problem. The effects of different electricity price assumptions on the valuation of tolling contracts are examined through numerical examples.
  • Electricity options pricing, tolling agreement, spark spread, real options, risk management, Monte Carlo simulation
  • RePEc:wsi:ijitdm:v:05:y:2006:i:03:p:421-436
Language
  • English
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