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Using real option analysis to quantify ethanol policy impact on the firm's entry into and optimal operation of corn ethanol facilities

Maxwell, Christian; Davison, Matt - In: Energy Economics 42 (2014) C, pp. 140-151

Ethanol crush spreads are used to model the value of a facility which produces ethanol from corn. A real option analysis is used to investigate the effects of model parameters on the related managerial decisions of (i) how to operate the facility through optimal switching from idled to...

Persistent link: https://www.econbiz.de/10010868724

Market efficiency and risk premia in short-term forward prices

Haugom, Erik; Ullrich, Carl J. - In: Energy Economics 34 (2012) 6, pp. 1931-1941

Using recursive estimation and rolling windows over extended sample periods we examine the time-varying relationship between spot and short-term forward prices in the Pennsylvania–New Jersey–Maryland (PJM) wholesale electricity market. We examine theoretical models of forward risk premia in...

Persistent link: https://www.econbiz.de/10010868730

A model for hedging load and price risk in the Texas electricity market

Coulon, Michael; Powell, Warren B.; Sircar, Ronnie - In: Energy Economics 40 (2013) C, pp. 976-988

forwards and some options, products often used for hedging purposes. Making use of these results, we illustrate in a simple …

Persistent link: https://www.econbiz.de/10010718752

How much should we pay for interconnecting electricity markets? A real options approach

Cartea, Álvaro; González-Pedraz, Carlos - In: Energy Economics 34 (2012) 1, pp. 14-30

financial terms, the value of an interconnector is the same as a strip of real options written on the spread between power …-reverting jump process and express the value of these real options in closed-form. The valuation tool is applied to five pairs of …

Persistent link: https://www.econbiz.de/10011039669

Growth to value: Option exercise and the cross section of equity returns

Ai, Hengjie; Kiku, Dana - In: Journal of Financial Economics 107 (2013) 2, pp. 325-349

-to-market characteristics. We model two primitive assets: value assets and growth assets that are options on assets in place. The cost of option … place. Consequently, growth options are less risky than value assets, and the model features a value premium. Our model …

Persistent link: https://www.econbiz.de/10010616813

Forecasting spot price volatility using the short-term forward curve

Haugom, Erik; Ullrich, Carl J. - In: Energy Economics 34 (2012) 6, pp. 1826-1833

We use high frequency real time spot prices and day-ahead forward prices from the Pennsylvania–New Jersey–Maryland wholesale electricity market to calculate, describe, and forecast spot price volatility. We introduce the concept of forward realized volatility calculated from day-ahead...

Persistent link: https://www.econbiz.de/10010588003