Real options and the value of generation capacity in the German electricity market

Hlouskova J, Kossmeier S, Obersteiner M, & Schnabl A (2005). Real options and the value of generation capacity in the German electricity market. Review of Financial Economics 14 (3): 297-310. DOI:10.1016/j.rfe.2004.12.001.

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Abstract

In this paper we implement a real options model for the unit commitment problem of an electricity producing turbine in a liberalized market. The model accounts for various operating constraints of the turbine. Price uncertainty is captured by a mean reverting process with jumps and time-varying means to account for seasonality. We demonstrate how the model can be used to value an electricity producing turbine, make profit-maximizing commitment decisions and compute risk profiles of generating assets for risk management purposes.

Item Type: Article
Research Programs: Forestry (FOR)
Bibliographic Reference: Review of Financial Economics; 14(3-4):297-310 (Published onlline 24 March 2005)
Depositing User: IIASA Import
Date Deposited: 15 Jan 2016 02:17
Last Modified: 05 Sep 2016 14:45
URI: http://pure.iiasa.ac.at/7467

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