Pricing Energy Derivatives by Linear Programming: Tolling Agreement Contracts

IF 0.8 4区经济学 Q4 BUSINESS, FINANCE

Journal of Computational Finance Pub Date : 2011-03-01 DOI:10.21314/JCF.2011.236

Valeriy Ryabchenko, S. Uryasev

引用次数: 8

Abstract

We introduce a new approach for pricing energy derivatives known as tolling agreement contracts. The pricing problem is reduced to a linear program. We prove that the optimal operating strategy for a power plant can be expressed through optimal exercise boundaries (similar to the exercise boundaries for American options). We find the boundaries as a byproduct of the pricing algorithm. The suggested approach can incorporate various real world power plant operational constraints. We demonstrate computational efficiency of the algorithm by pricing 1and 10-year tolling agreement contracts.

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基于线性规划的能源衍生品定价:收费协议合约

我们引入了一种新的能源衍生品定价方法，即收费协议合同。定价问题被简化为一个线性规划。我们证明了电厂的最优运行策略可以用最优操作边界来表示(类似于美式期权的操作边界)。我们发现边界是定价算法的副产品。建议的方法可以结合各种现实世界的发电厂运行限制。我们通过对1年和10年收费协议合同进行定价来证明该算法的计算效率。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Journal of Computational Finance BUSINESS, FINANCE-

CiteScore

0.90

自引率

0.00%

发文量

期刊介绍： The Journal of Computational Finance is an international peer-reviewed journal dedicated to advancing knowledge in the area of financial mathematics. The journal is focused on the measurement, management and analysis of financial risk, and provides detailed insight into numerical and computational techniques in the pricing, hedging and risk management of financial instruments. The journal welcomes papers dealing with innovative computational techniques in the following areas: Numerical solutions of pricing equations: finite differences, finite elements, and spectral techniques in one and multiple dimensions. Simulation approaches in pricing and risk management: advances in Monte Carlo and quasi-Monte Carlo methodologies; new strategies for market factors simulation. Optimization techniques in hedging and risk management. Fundamental numerical analysis relevant to finance: effect of boundary treatments on accuracy; new discretization of time-series analysis. Developments in free-boundary problems in finance: alternative ways and numerical implications in American option pricing.