A power plant valuation under an asymmetric risk criterion taking into account maintenance costs

Clémence Alasseur, Emmanuel Gobet (), Isaque Pimentel () and Xavier Warin
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Clémence Alasseur: FiME Lab - Laboratoire de Finance des Marchés d'Energie - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CREST - EDF R&D - EDF R&D - EDF - EDF, EDF R&D - EDF R&D - EDF - EDF
Emmanuel Gobet: CMAP - Centre de Mathématiques Appliquées de l'Ecole polytechnique - Inria - Institut National de Recherche en Informatique et en Automatique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique
Isaque Pimentel: CMAP - Centre de Mathématiques Appliquées de l'Ecole polytechnique - Inria - Institut National de Recherche en Informatique et en Automatique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique, EDF R&D - EDF R&D - EDF - EDF
Xavier Warin: EDF R&D - EDF R&D - EDF - EDF

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Abstract: Power producers are interested in valuing their power plant production. By trading into forward contracts, we propose to reduce the contingency of the associated income considering the fixed costs and using an asymmetric risk criterion. In an asymptotic framework, we provide an optimal hedging strategy through a solution of a nonlinear partial differential equation. As a numerical experiment, we analyze the impact of the fixed costs structure on the hedging policy and the value of the assets.

Keywords: Hedging; asymmetric risk; fully nonlinear PDE; cost management; power plant (search for similar items in EconPapers)
Date: 2019-03-23
New Economics Papers: this item is included in nep-ene and nep-env
Note: View the original document on HAL open archive server: https://hal.science/hal-02077740v1
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