Valuation of Electricity Swing Options by Multistage Stochastic Programming
Type
working paper
Date Issued
2006
Author(s)
Abstract
Electricity swing options are American-style path-dependent power derivatives. 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 insightful numerical results and discuss analytically tractable limiting cases.
Language
English
Keywords
stochastic programming
swing option
virtual power plant
energy
aggregation
discretization
HSG Classification
contribution to scientific community
Refereed
No
Subject(s)
Division(s)
Eprints ID
29493
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Name
Valuation_of_Electricity_Swing_Options_WP_iorcf-HSG_06-04-07.pdf
Size
311.21 KB
Format
Adobe PDF
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