In electricity markets around the world, the substantial increase of intermittent renewable electricity generation has intensified concerns about generation adequacy, ultimately driving the implementation of capacity remuneration mechanisms. Although formally technology-neutral, substantial...

We introduce a new Monte Carlo method for constructing the exercise boundary of an American option in a generalized Black-Scholes framework. Based on a known exercise boundary, it is shown how to price and hedge the American option by Monte Carlo simulation of suitable probabilistic...