Intrinsic Storage Valuation by Variational Analysis
Optimization and Control
2015-06-24 v1 Chaotic Dynamics
Mathematical Finance
Abstract
The mathematical problem concerning intrinsic storage optimisation is formulated and solved by means of variational analysis. The solution, though obtained in implicit form, still sheds light on many important features of the optimal exercise strategy. It is shown how the solution depends on different constraint types including carry cost and cycle constraint. Additionally, the relationship between intrinsic and stochastic solutions is investigated. In particular, we show that the optimal stochastic exercise decision is always close to the intrinsic one.
Keywords
Cite
@article{arxiv.1506.06979,
title = {Intrinsic Storage Valuation by Variational Analysis},
author = {Dmitry Lesnik},
journal= {arXiv preprint arXiv:1506.06979},
year = {2015}
}
Comments
arXiv admin note: text overlap with arXiv:1011.1234