This paper proposes a new model for computing Value-at-Risk forecasts. It incorporates information about the market’s perceived uncertainty about the future from volatility indices.
Energy Risk: Comparing power plant delta hedging strategies
A comparison of common delta-hedging strategies and calculations finds that simple formulas used to calculate delta hedges can lead to severe biases. This article presents a relatively fast, but more accurate calculation approach. It is based on a combination of Monte Carlo price simulations and dispatch optimization, using dynamic programming.
Journal of Energy Markets: Gas storage valuation using a multi-factor price process
In this paper we demonstrate the application of multi-factor Least-Squares Monte Carlo to gas storage valuation. We study the impact of using multi-factor price processes on different aspects of the valuation such as convergence, average storage value and distribution of storage values in a numerical example.
Practical Derivatives: KYOS consultants write chapter about Energy Derivatives
This new second edition shows how derivatives are used in a variety of transactions, how the documentation works and why boards need to be aware of them. KYOS director Cyriel de Jong wrote the chapter on Energy Derivatives.
World Power: The value of starting up a power plant
In this article we demonstrate the impact of various start-stop constraints and costs for the value of a power station. This impact analysis is possible by applying advanced techniques for generating realistic Monte Carlo price simulations in combination with techniques for optimizing the production pattern.
World Power: Realistic power plant valuations with cointegration
Traditional net present value (NPV) analysis disregards the flexibility to adjust production decisions to market developments, and thus underestimate true plant value. On the other hand, methods treating power plants as a series of spread options ignore technical and contractual restrictions, and thus overestimate true plant value. In this article we demonstrate the use of cointegration to incorporate market fundamentals and calculate dynamic, yet reasonable, spread levels and power plant values.
World Power: uncertainties in wind production often priced at too low levels
This article describes the pricing and hedging of wind power contracts. It demonstrates that substantial discounts relative to baseload power prices are reasonable to cover the negative wind-price correlation and to cover the difficulty of hedging price risks.