On the optimal exercise of swing options in electricity markets




Fred Espen Benth, Jukka Lempa, Trygve Kastberg NIlssen

2011

Journal of Energy Markets

4

4

3

28



We study the optimal exercise of a swing option in electricity markets. To this end, we set up a model in terms of a stochastic control problem. In this model, the option can be exercised in continuous time and is subject to a total volume constraint. We analyze some fundamental properties of the model and carry out a numerical analysis. Finally, we illustrate the results numerically.



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