An Integrated CVaR and Real Options Approach to Investments in the Energy Sector

Fortin I, Fuss S, Hlouskova J, Khabarov N, Obersteiner M, & Szolgayova J (2007). An Integrated CVaR and Real Options Approach to Investments in the Energy Sector. Economic Series #209, Institute for Higher Studies, Vienna, Austria (May 2007)

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Abstract

The objective of this paper is to combine a real options framework with portfolio optimization techniques and to apply this new framework to investments in the electricity sector. In particular, a real options model is used to assess the adoption decision of particular technologies under uncertainty. These technologies are coal-fired power plants, biomass-fired power plants and onshore wind mills, and they are representative of technologies based on fossil fuels, biomass and renewables, respectively. The return distributions resulting from this analysis are then used as an input to a portfolio optimization, where the measure of risk is the Conditional Value-at-Risk (CVaR).

Item Type: Other
Uncontrolled Keywords: Portfolio optimization; CVaR; Climate change policy; Uncertainty; Real options; Electricity; Investments
Research Programs: Forestry (FOR)
Bibliographic Reference: Economic Series #209, Institute for Higher Studies, Vienna, Austria (May 2007)
Depositing User: IIASA Import
Date Deposited: 15 Jan 2016 08:40
Last Modified: 20 Jan 2016 16:44
URI: http://pure.iiasa.ac.at/8317

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