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    Pricing multiple interruptible-swing contracts

    Figueroa, M. (2006) Pricing multiple interruptible-swing contracts. Working Paper. Birkbeck, University of London, London, UK.

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    Abstract

    In this article we price a multiple-interruptible contract for the electricity market in England and Wales under a mean-reverting jump-diffusion model with seasonality. We do so by combining forward contracts with a swing option which can be exercised a pre-specified number of times. We price this swing option by means of an extension of the Least-Squares Monte Carlo methodology for American options. We additionally compute the lower and upper bounds for this contract. For the computation of the lower bound we provide a semi-analytical formula which reduces greatly the required computational time.

    Metadata

    Item Type: Monograph (Working Paper)
    Additional Information: BWPEF 0606
    Keyword(s) / Subject(s): Energy derivatives, electricity market, Least-Squares Monte Carlo, swing options
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Depositing User: Administrator
    Date Deposited: 28 Mar 2019 07:06
    Last Modified: 02 Aug 2019 06:27
    URI: http://eprints.bbk.ac.uk/id/eprint/26940

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