Valuation of electricity swing options by multistage stochastic programming
Automatica (Journal of IFAC)
Optimal Commodity Trading with a Capacitated Storage Asset
Management Science
On the Pricing of Natural Gas Pipeline Capacity
Manufacturing & Service Operations Management
Valuation of Storage at a Liquefied Natural Gas Terminal
Operations Research
Valuing the Treasury's Capital Assistance Program
Management Science
Integrated Optimization of Procurement, Processing, and Trade of Commodities
Operations Research
Forest of stochastic meshes: A new method for valuing high-dimensional swing options
Operations Research Letters
Manufacturing & Service Operations Management
Primal and Dual Pricing of Multiple Exercise Options in Continuous Time
SIAM Journal on Financial Mathematics
Simulation valuation of multiple exercise options
Proceedings of the Winter Simulation Conference
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In the energy markets, in particular the electricity and natural gas markets, many contracts incorporate flexibility-of-delivery options known as "swing" or "take-or-pay" options. Subject to daily as well as periodic constraints, these contracts permit the option holder to repeatedly exercise the right to receive greater or smaller amounts of energy. We extract market information from forward prices and volatilities and build a pricing framework for swing options based on a one-factor mean-reverting stochastic process for energy prices that explicitly incorporates seasonal effects. We present a numerical scheme for the valuation of swing options calibrated for the case of natural gas.