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Conference Paper: Application of exotic real option for electricity market: Trial for supply function bids case

TitleApplication of exotic real option for electricity market: Trial for supply function bids case
Authors
Liu, KHou, YWu, FFNi, Y
KeywordsBlack scholes formula
Electricity market
Real option
Supply function
Issue Date2007
Citation
2007 Ieee Power Engineering Society General Meeting, Pes, 2007 How to Cite?
DOI: http://dx.doi.org/10.1109/PES.2007.385934
AbstractReal option theory has been widely applied for electricity asset valuation and investment issues. Since the supply function is the considerable bidding form of electricity market. Here we present a new exotic electricity real option tool in case of supply function bids for nowadays electricity market. Two typical electricity market bids forms- continuous and block bids curve-yielding the different nonlinear payoff function from that of standard Black Scholes formula are studied. The analytical formulas for this electricity option based on the classical Geometric Brownian motion and Mean reverting price process are explicitly derived. The test results by Monte Carlo simulation illustrate our formulas are correct. Our model and formula offer an important supplement for application of real option theory for electricity market. © 2007 IEEE.
Persistent Identifierhttp://hdl.handle.net/10722/99382
References
References in Scopus

 

DC FieldValueLanguage
dc.contributor.authorLiu, Ken_HK
dc.contributor.authorHou, Yen_HK
dc.contributor.authorWu, FFen_HK
dc.contributor.authorNi, Yen_HK
dc.date.accessioned2010-09-25T18:27:42Z-
dc.date.available2010-09-25T18:27:42Z-
dc.date.issued2007en_HK
dc.identifier.citation2007 Ieee Power Engineering Society General Meeting, Pes, 2007en_HK
dc.identifier.urihttp://hdl.handle.net/10722/99382-
dc.description.abstractReal option theory has been widely applied for electricity asset valuation and investment issues. Since the supply function is the considerable bidding form of electricity market. Here we present a new exotic electricity real option tool in case of supply function bids for nowadays electricity market. Two typical electricity market bids forms- continuous and block bids curve-yielding the different nonlinear payoff function from that of standard Black Scholes formula are studied. The analytical formulas for this electricity option based on the classical Geometric Brownian motion and Mean reverting price process are explicitly derived. The test results by Monte Carlo simulation illustrate our formulas are correct. Our model and formula offer an important supplement for application of real option theory for electricity market. © 2007 IEEE.en_HK
dc.languageengen_HK
dc.relation.ispartof2007 IEEE Power Engineering Society General Meeting, PESen_HK
dc.subjectBlack scholes formulaen_HK
dc.subjectElectricity marketen_HK
dc.subjectReal optionen_HK
dc.subjectSupply functionen_HK
dc.titleApplication of exotic real option for electricity market: Trial for supply function bids caseen_HK
dc.typeConference_Paperen_HK
dc.identifier.emailHou, Y: yhhou@hku.hken_HK
dc.identifier.emailWu, FF: ffwu@eee.hku.hken_HK
dc.identifier.emailNi, Y: yxni@eee.hku.hken_HK
dc.identifier.authorityHou, Y=rp00069en_HK
dc.identifier.authorityWu, FF=rp00194en_HK
dc.identifier.authorityNi, Y=rp00161en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1109/PES.2007.385934en_HK
dc.identifier.scopuseid_2-s2.0-42549086168en_HK
dc.identifier.hkuros145903en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-42549086168&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.spage1en_HK
dc.identifier.epage7en_HK
dc.identifier.scopusauthoridLiu, K=23009288400en_HK
dc.identifier.scopusauthoridHou, Y=7402198555en_HK
dc.identifier.scopusauthoridWu, FF=7403465107en_HK
dc.identifier.scopusauthoridNi, Y=7402910021en_HK

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