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Conference Paper: Application of exotic real option for electricity market: Trial for supply function bids case
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TitleApplication of exotic real option for electricity market: Trial for supply function bids case
 
AuthorsLiu, K1
Hou, Y2 3
Wu, FF2 1
Ni, Y2 1
 
KeywordsBlack scholes formula
Electricity market
Real option
Supply function
 
Issue Date2007
 
Citation2007 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.
 
DOIhttp://dx.doi.org/10.1109/PES.2007.385934
 
ReferencesReferences in Scopus
 
DC FieldValue
dc.contributor.authorLiu, K
 
dc.contributor.authorHou, Y
 
dc.contributor.authorWu, FF
 
dc.contributor.authorNi, Y
 
dc.date.accessioned2010-09-25T18:27:42Z
 
dc.date.available2010-09-25T18:27:42Z
 
dc.date.issued2007
 
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.
 
dc.description.naturelink_to_subscribed_fulltext
 
dc.identifier.citation2007 Ieee Power Engineering Society General Meeting, Pes, 2007 [How to Cite?]
DOI: http://dx.doi.org/10.1109/PES.2007.385934
 
dc.identifier.doihttp://dx.doi.org/10.1109/PES.2007.385934
 
dc.identifier.epage7
 
dc.identifier.hkuros145903
 
dc.identifier.scopuseid_2-s2.0-42549086168
 
dc.identifier.spage1
 
dc.identifier.urihttp://hdl.handle.net/10722/99382
 
dc.languageeng
 
dc.relation.ispartof2007 IEEE Power Engineering Society General Meeting, PES
 
dc.relation.referencesReferences in Scopus
 
dc.subjectBlack scholes formula
 
dc.subjectElectricity market
 
dc.subjectReal option
 
dc.subjectSupply function
 
dc.titleApplication of exotic real option for electricity market: Trial for supply function bids case
 
dc.typeConference_Paper
 
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Author Affiliations
  1. The University of Hong Kong
  2. IEEE
  3. Tsinghua University