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 Faculties and Schools > Faculty of Business and Law > Birkbeck Business School |
| Depositing User: | Administrator |
| Date Deposited: | 28 Mar 2019 07:06 |
| Last Modified: | 02 Aug 2023 17:50 |
| URI: | https://eprints.bbk.ac.uk/id/eprint/26940 |
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