Pricing of hourly exercisable electricity swing options using different price processes

Guido Hirsch

Journal of Energy Markets

Abstract: ABSTRACT In this paper fair values of hourly exercisable swing options written as the underlying on the EEX spot price are calculated using three different two-factor models: a regime-switching AR process, a jump-diffusion process with Bernoulli jump terms and a normal inverse Gaussian process. An efficient least squares Monte Carlo algorithm is introduced and applied to swing options with up to 5,000 exercise rights. Finally, the three models are compared with a focus on their ability to reproduce the characteristics of the EEX spot prices and the swing option values resulting for different numbers of exercise rights.

References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.risk.net/journal-of-energy-markets/216 ... rent-price-processes (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rsk:journ2:2160758

Access Statistics for this article

More articles in Journal of Energy Markets from Journal of Energy Markets
Bibliographic data for series maintained by Thomas Paine ().