Hedging Swing contract on gas markets

Xavier Warin

Papers from arXiv.org

Abstract: Swing options on the gas market are american style option where daily quantities exercices are constrained and global quantities exerciced each year constrained too. The option holder has to decide each day how much he consumes of the quantities satisfying the constraints and tries to use a strategy in order to maximize its expected profit. The pay off fonction is a spread between the spot gas market and the value of an index composed of the past average of some commodities spot or future prices. We study the valorization and the effectiveness of the dynamic hedging of such a contract.

Date: 2012-08
New Economics Papers: this item is included in nep-ene
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