Valuation of electricity derivatives
Abstract
This paper aims to forecast the value of electricity derivatives in the MIBEL system. For that
purpose, three different models based on the simulation of future price scenarios are
developed.
The project begins with an extensive analysis of prices in spot and forward markets, with the
objetive of charactering market's behaviour. The obtained results are introduced in the
simulation models, building their basis. The models aim to forecast all the possible future price
scenarios and their probability. A Brownian motion and a mean reversion model have been used
to simulate the spot market. A Monte Carlo algorithm forecasted the forward curve evolution.
Finally, the models are applied to two practical cases. The first one consists on valuating a collar
for a consumer. The second one, focuses in the valuation of a combined-cycle gas turbine asset.
The calculated results are compared with the ones obtained with the Black-Scholes formula.
As a conclusion, the Monte Carlo model obtains the best trade-off between simplicity and
accuracy.
Trabajo Fin de Máster
Valuation of electricity derivativesTitulación / Programa
Master in the Electric Power IndustryMaterias/ UNESCO
53 Ciencias económicas5312 Economía sectorial
531205 Energía
12 Matemáticas
1207 Investigación operativa
120713 Planificación
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