Related papers: Pricing Reliability Options under different electr…
Modern market management systems continue to evolve due to the intentions to improve system security and reliability. This evolvement has been leading to a transition of market auction models from a deterministic structure with…
We propose a new model for electricity pricing based on the price cap principle. The particularity of the model is that the asset price is an exponential functional of a jump L\'evy process. This model can capture both mean reversion and…
This paper aims to provide a practical example on the assessment and propagation of input uncertainty for option pricing when using tree-based methods. Input uncertainty is propagated into output uncertainty, reflecting that option prices…
This article considers the pricing and hedging of a call option when liquidity matters, that is, either for a large nominal or for an illiquid underlying asset. In practice, as opposed to the classical assumptions of a price-taking agent in…
In this paper a real option approach for the valuation of real assets is presented. Two continuous time models used for valuation are described: geometric Brownian motion model and interest rate model. The valuation for electricity spread…
Based on forward curves modelled as Hilbert-space valued processes, we analyse the pricing of various options relevant in energy markets. In particular, we connect empirical evidence about energy forward prices known from the literature to…
The purpose of the paper is to present a new pricing method for clean spread options, and to illustrate its main features on a set of numerical examples produced by a dedicated computer code. The novelty of the approach is embedded in the…
The increase of renewables in the grid and the volatility of the load create uncertainties in the day-ahead prices of electricity markets. Adaptive robust optimization (ARO) and stochastic optimization have been used to make commitment and…
In an electric power system, demand fluctuations may result in significant ancillary cost to suppliers. Furthermore, in the near future, deep penetration of volatile renewable electricity generation is expected to exacerbate the variability…
In commodity and energy markets swing options allow the buyer to hedge against futures price fluctuations and to select its preferred delivery strategy within daily or periodic constraints, possibly fixed by observing quoted futures…
We propose a novel reliability model for composing energy service requests. The proposed model is based on consumers' behavior and history of energy requests. The reliability model ensures the maximum incentives to providers. Incentives are…
This paper takes a fresh look at the economic theory that is motivation for pricing models, such as critical peak pricing (CPP), or surge pricing, and the demand response models advocated by policy makers and in the power systems…
In order to deal with market power that sporadically results from contingencies (e.g., severe weather, plant outages) most electricity markets have institutions in charge of monitoring market performance and mitigating market power. The…
Pricing and settlement mechanisms are crucial for efficient re-source allocation, investment incentives, market competition, and regulatory oversight. In the United States, Regional Transmission Operators (RTOs) adopts a uniform pricing…
In this note, we develop stock option price approximations for a model which takes both the risk o default and the stochastic volatility into account. We also let the intensity of defaults be influenced by the volatility. We show that it…
We study the valuation and hedging problem of European options in a market subject to liquidity shocks. Working within a Markovian regime-switching setting, we model illiquidity as the inability to trade. To isolate the impact of such…
Electricity price forecasting has become a critical tool for decision-making in energy markets, particularly as the increasing penetration of renewable energy introduces greater volatility and uncertainty. Historically, research in this…
We consider the setting in which an electric power utility seeks to curtail its peak electricity demand by offering a fixed group of customers a uniform price for reductions in consumption relative to their predetermined baselines. The…
The increasing penetration of renewable energy in recent years has led to more uncertainties in power systems. In order to maintain system reliability and security, electricity market operators need to keep certain reserves in the…
Purpose: Trading on electricity markets occurs such that the price settlement takes place before delivery, often day-ahead. In practice, these prices are highly volatile as they largely depend upon a range of variables such as electricity…