Jussi Keppo
Assistant Professor - Industrial and Operations Engineering, College of Engineering
Articles by this Author
Pricing of electricity swing options
- By Jussi Keppo
- Published 09/27/2007
- Valuation , Risk management
- Unrated
Keywords: Derivative pricing, electricity market, load pattern
Published in:
Publication year: 2002
We consider the pricing of electricity swing options that hedge the electricity price risk and also partly the risks in the option owner's load pattern. The swing derivative sets boundaries for the purchased power and energy and it specifies the price at which the option owner can buy energy. The name swing option comes from the fact that the power usage is allowed to swing between the lower and upper boundaries. We show that the swing options can be priced and hedged by using regular electricity forwards and call options.
Published in:
Publication year: 2002
We consider the pricing of electricity swing options that hedge the electricity price risk and also partly the risks in the option owner's load pattern. The swing derivative sets boundaries for the purchased power and energy and it specifies the price at which the option owner can buy energy. The name swing option comes from the fact that the power usage is allowed to swing between the lower and upper boundaries. We show that the swing options can be priced and hedged by using regular electricity forwards and call options.