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research article
Valuation of electricity swing options by multistage stochastic programming
2009
Electricity swing options are Bermudan-style path-dependent derivatives on electrical energy. We consider an electricity market driven by several exogenous risk factors and formulate the pricing problem for a class of swing option contracts with energy and power limits as well as ramping constraints. Efficient numerical solution of the arising multistage stochastic program requires aggregation of decision stages, discretization of the probability space, and reparameterization of the decision space. We report on numerical results and discuss analytically tractable limiting cases.
Type
research article
Authors
Publication date
2009
Publisher
Published in
Volume
45
Issue
4
Start page
889
End page
899
Peer reviewed
NON-REVIEWED
Written at
OTHER
EPFL units
Available on Infoscience
January 21, 2014
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