We analyze investments in gas fired power plants under stochastic electricity and gas prices. We use a real options approach, taking into account the economic information in futures and forward prices. A simple but realistic two-factor model is used for price process, enabling analysis of the...

Multi-period guarantees are often embedded in life insurance contracts. In this paper we consider the problem of hedging these multi-period guarantees in the presence of transaction costs. We derive the hedging strategies for the cheapest hedge portfolio for a multi-period guarantee that with...

This paper presents a method for assessing small hydropower projects that are subject to uncertain electricity prices. We present a real options-based method with continuous scaling, and we find that there is a unique price limit for initiating the project. If the current electricity price is...

In contrast to forwards and futures on storable commodities, prices of long-term electricity forwards exhibit a dynamics different to that of short-term and mid-term prices. We model long-term electricity forward prices through demand and supply for electricity, adjusted with a risk premium....

This paper provides insight in the time-varying relation between electricity futures prices and fundamentals in the form of prices of contracts for fossil fuels. As supply curves are not constant and different producers have different marginal costs of production, we argue that the relation...

This paper adopts a real options approach to analyze investment timing and capacity choice for renewable energy projects under different support schemes. The main purpose is to examine investment behavior under the most extensively employed support schemes, namely, feed-in tariffs and renewable...

We analyze risk management trends in electricity commodity markets using the production and transaction data and written hedging policies of 12 Norwegian hydropower companies. The scope of our analysis is the hedging of physical electricity production using the power derivatives available at...

In this paper we develop an optimization model to derive static hedge positions for hydropower producers with different risk characteristics. Previous research has primarily considered dynamic hedging; however, static hedging is the common choice among hydropower producers because of its...