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Pricing Of Swing Options
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Book Synopsis Pricing of Swing Options by : Kai-Siong Leow
Download or read book Pricing of Swing Options written by Kai-Siong Leow and published by . This book was released on 2013 with total page 110 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the problem of pricing swing options, a class of multiple early exercise options that are traded in energy market, particularly in the electricity and natural gas markets. These contracts permit the option holder to periodically exercise the right to trade a variable amount of energy with a counterparty, subject to local volumetric constraints. In addition, the total amount of energy traded from settlement to expiration with the counterparty is restricted by a global volumetric constraint. Violation of this global volumetric constraint is allowed but would lead to penalty settled at expiration. The pricing problem is formulated as a stochastic optimal control problem in discrete time and state space. We present a stochastic dynamic programming algorithm which is based on piecewise linear concave approximation of value functions. This algorithm yields the value of the swing option under the assumption that the optimal exercise policy is applied by the option holder. We present a proof of an almost sure convergence that the algorithm generates the optimal exercise strategy as the number of iterations approaches to infinity. Finally, we provide a numerical example for pricing a natural gas swing call option.
Book Synopsis Swing Option Pricing by Dynamic Programming with B-spline Density Projection by : Justin Kirkby
Download or read book Swing Option Pricing by Dynamic Programming with B-spline Density Projection written by Justin Kirkby and published by . This book was released on 2020 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: Swing options are a type of exotic financial derivative which generalize American options to allow for multiple early-exercise actions during the contract period. These contracts are widely traded in commodity and energy markets, but are often difficult to value using standard techniques due to their complexity and strong path-dependency. There are numerous interesting varieties of swing options, which differ in terms of their intermediate cash flows, and the constraints (both local and global) which they impose on early-exercise (swing) decisions. We introduce an efficient and general purpose transform-based method for pricing discrete and continuously monitored swing options under exponential L 'evy models, which applies to contracts with fixed rights clauses, as well as recovery time delays between exercise. The approach combines dynamic programming with an efficient method for calculating the continuation value between monitoring dates, and applies generally to multiple early-exercise contracts, providing a unified framework for pricing a large class of exotic derivatives. Efficiency and accuracy of the method is supported by a series of numerical experiments which further provide benchmark prices for future research.
Book Synopsis Commodity Option Pricing by : Iain J. Clark
Download or read book Commodity Option Pricing written by Iain J. Clark and published by John Wiley & Sons. This book was released on 2014-04-21 with total page 356 pages. Available in PDF, EPUB and Kindle. Book excerpt: Commodity Option Pricing: A Practitioner’s Guide covers commodity option pricing for quantitative analysts, traders or structurers in banks, hedge funds and commodity trading companies. Based on the author’s industry experience with commodity derivatives, this book provides a thorough and mathematical introduction to the various market conventions and models used in commodity option pricing. It introduces the various derivative products typically traded for commodities and describes how these models can be calibrated and used for pricing and risk management. This book has been developed with input from traders and features examples using real-world data, together with relevant up-to-date academic research. This book includes practical descriptions of market conventions and quote codes used in commodity markets alongside typical products seen in broker quotes and used in calibration. Also discussed are commodity models and their mathematical derivation and volatility surface modelling for traded commodity derivatives. Gold, silver and other precious metals are addressed, including gold forward and gold lease rates, as well as copper, aluminium and other base metals, crude oil and natural gas, refined energy and electricity. There are also sections on the products encountered in commodities such as crack spread and spark spread options and alternative commodities such as carbon emissions, weather derivatives, bandwidth and telecommunications trading, plastics and freight. Commodity Option Pricing is ideal for anyone working in commodities or aiming to make the transition into the area, as well as academics needing to familiarize themselves with the industry conventions of the commodity markets.
Book Synopsis Pricing of Electricity Swing Options by : Jussi Keppo
Download or read book Pricing of Electricity Swing Options written by Jussi Keppo and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider the pricing of electricity swing options that hedge the electricity price risk and also partly hedge the risks in the option owner's electricity consumption process. The swing derivative sets instantaneous and cumulative boundaries for the electricity consumption and it specifies the price at which the option owner can buy energy. The name swing option comes from these consumption boundaries since the consumption swings between the lower and upper boundaries. We show that the swing options can be priced and hedged with regular electricity forwards and call options. Then we illustrate in a numerical example how swing options can be used to model and hedge power plants.
Book Synopsis Pricing of Gas Swing Options Using Monte Carlo Methods by : Andrea Klimešová
Download or read book Pricing of Gas Swing Options Using Monte Carlo Methods written by Andrea Klimešová and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Motivated by the changing nature of the natural gas industry in the European Union driven by the liberalization process, we focus on pricing of gas swing options. These options are embedded in typical gas sales agreements in the form of offtake flexibility concerning volume and time. The gas swing option is actually a set of several American puts on a spread between prices of two or more energy commodities. This fact together with the fact that the energy markets are fundamentally different from traditional financial security markets is important for our choice of valuation technique. Due to the specific features of the energy markets, the existing analytic approximations for spread option pricing are hardly applicable to our framework. That is why we employ Monte Carlo methods to model the spot price dynamics of the underlying commodities. The price of an arbitrarily chosen gas swing option is then computed in accordance with the concept of risk-neutral expectations. Finally, our result is compared with the real payoff from the option realized at time of the option execution and the maximum ex-post payoff the buyer could generate in case he knew the future, discounting to the original time of the option pricing. -- energy markets ; gas sales agreement ; gas swing option ; Monte Carlo simulations ; spread option pricing
Book Synopsis The Numerical Pricing of Swing Options in the Electricity Market by : Elise Van den Hooff
Download or read book The Numerical Pricing of Swing Options in the Electricity Market written by Elise Van den Hooff and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider the numerical pricing of swing options on a commodity such as electricity. These kinds of options provide their holders with a certain form of protection against the volatility of electricity prices, which are determined by the principle of supply and demand. We consider three different models for the commodity spot price, and derive systems of (differential) (in)equalities for the swing option price under these models. These systems consist of Partial Differential Complementarity Problems (PDCPs), supplemented with consistency conditions for certain discrete time points. Multiple methods are considered for the solution of these systems. For the discretization of the PDCPs, we consider a technique using finite differences and the Crank-Nicolson scheme. In multidimensional settings, more advanced ADI schemes are used instead of the Crank-Nicolson scheme, to reduce the computational cost. In strongly convection-dominated problems, this technique does not approve satisfactorily. To resolve this, semi-Lagrangian methods are considered for the convection parts of the PDCPs. For the further solution of the PDCPs after the discretization step, the Ikonen-Toivanen method and the Penalty Approach are used. For the three spot price models that we consider, we present ample numerical results for the pricing of swing options under these models.
Book Synopsis Swing Pricing and Fragility in Open-end Mutual Funds by : Dunhong Jin
Download or read book Swing Pricing and Fragility in Open-end Mutual Funds written by Dunhong Jin and published by International Monetary Fund. This book was released on 2019-11-01 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: How to prevent runs on open-end mutual funds? In recent years, markets have observed an innovation that changed the way open-end funds are priced. Alternative pricing rules (known as swing pricing) adjust funds’ net asset values to pass on funds’ trading costs to transacting shareholders. Using unique data on investor transactions in U.K. corporate bond funds, we show that swing pricing eliminates the first-mover advantage arising from the traditional pricing rule and significantly reduces redemptions during stress periods. The positive impact of alternative pricing rules on fund flows reverses in calm periods when costs associated with higher tracking error dominate the pricing effect.
Book Synopsis A New Swing-Contract Design for Wholesale Power Markets by :
Download or read book A New Swing-Contract Design for Wholesale Power Markets written by and published by John Wiley & Sons. This book was released on 2020-12-12 with total page 288 pages. Available in PDF, EPUB and Kindle. Book excerpt: Provides comprehensive information on swing contracts for flexible reserve provision in wholesale power markets This book promotes a linked swing-contract market design for centrally-managed wholesale power markets to facilitate increased reliance on renewable energy resources and demand-side participation. The proposed swing contracts are firm or option two-part pricing contracts permitting resources to offer the future availability of dispatchable power paths (reserve) with broad types of flexibility in their power attributes. A New Swing-Contract Design for Wholesale Power Markets begins with a brief introduction to the subject, followed by two chapters that cover: general goals for wholesale power market design; history, operations, and conceptual concerns for current U.S. RTO/ISO-managed wholesale power markets; and the relationship of the present study to previous swing-contract research. The next eight chapters cover: a general swing-contract formulation for centrally-managed wholesale power markets; illustrative swing-contract reserve offers; inclusion of reserve offers with price swing; inclusion of price-sensitive reserve bids; and extension to a linked collection of swing-contract markets. Operations in current U.S. RTO/ISO-managed markets are reviewed in the following four chapters, and conceptual and practical advantages of the linked swing-contract market design are carefully considered. The book concludes with an examination of two key issues: How might current U.S. RTO/ISO-managed markets transition gradually to a swing-contract form? And how might independent distribution system operators, functioning as linkage entities at transmission and distribution system interfaces, make use of swing contracts to facilitate their participation in wholesale power markets as providers of ancillary services harnessed from distribution-side resources? In summary, this title: Addresses problems with current wholesale electric power markets by developing a new swing-contract market design from concept to practical implementation Provides introductory chapters that explain the general principles motivating the new market design, hence why a new approach is required Develops a new type of swing contract suitable for wholesale power markets with increasing reliance on renewable energy and active demand-side participation A New Swing-Contract Design for Wholesale Power Markets is an ideal book for electric power system professionals and for students specializing in electric power systems.
Book Synopsis Pricing of Some Path-dependent Options on Equities and Commodities by : Mats Kjaer
Download or read book Pricing of Some Path-dependent Options on Equities and Commodities written by Mats Kjaer and published by Goteborg University. This book was released on 2006 with total page 130 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Swing Trading For Dummies by : Omar Bassal, CFA
Download or read book Swing Trading For Dummies written by Omar Bassal, CFA and published by John Wiley & Sons. This book was released on 2019-04-04 with total page 475 pages. Available in PDF, EPUB and Kindle. Book excerpt: Increase profit and limit risk with swing trading basics Swing trading is all about riding the momentum of brief price changes in trending stocks. Although it can be risky, swing trading is popular for a reason, and Swing Trading For Dummies, 2nd Edition, will show you how to manage the risk and navigate the latest markets to succeed at this lucrative trading strategy. In this updated edition, you’ll find expert guidance on new accounting rules, the 2018 tax law, trading in international markets, algorithmic trading, and more. Plus, learn about the role social media now plays in moving asset prices, and how you can tap into online trends to ride price swings. Understand money management, journal keeping, and strategy planning Focus on fundamental analysis to increase your chance of success Evaluate companies to screen for under- or overvalued stocks Develop and implement your trading plan and calculate performance Starting from the basic differences between swing trading and other trading styles and progressing through plain-English explanations of more advanced topics like charts and reporting standards, Swing Trading For Dummies will help you maintain and grow your assets with swing trading in any market!
Book Synopsis Pricing Electricity Derivatives and the Swing Option Trading Strategy by : Yuliya Plyakha
Download or read book Pricing Electricity Derivatives and the Swing Option Trading Strategy written by Yuliya Plyakha and published by . This book was released on 2005 with total page 170 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Pricing of Electricity Swing Options by : Devangkumar Bhatt
Download or read book Pricing of Electricity Swing Options written by Devangkumar Bhatt and published by . This book was released on 2011 with total page 84 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Swing Trading Options by : Derek Sanders
Download or read book Swing Trading Options written by Derek Sanders and published by Derek Sanders. This book was released on 2021-06-19 with total page 150 pages. Available in PDF, EPUB and Kindle. Book excerpt: If you believe in the concept that knowledge is power, then you will surely be interested in what it will be explained in this book. The topics examined will help you understand how the market works, even if you have a basic or no knowledge in this area. You’ll learn the best swing trading strategies with options and you’ll find simple examples, very easy to understand that will allow you to acquire the knowledge necessary to start your business, with a particular focus on risk management in order to minimize losses and maximize profits. Here's what you'll learn: -What the objectives of swing trading are -The best strategies and how to put them into practice -Factors influencing option prices -Why Options Trading is better than Stock Trading -How to negotiate options -Master plan swing trading -How to deal with Risk management -Swing trading with Call and with Put Even if you have no interest in trading with options and their related concepts, I can assure you that after going through this guide, your perception of options trading won’t remain the same. You may become a very excited trader and a very prominent one. Grab your copy now!
Book Synopsis Pricing Swing Options within Stochastic Volatility Model by Least Square Monte Carlo by :
Download or read book Pricing Swing Options within Stochastic Volatility Model by Least Square Monte Carlo written by and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Swaps & Financial Derivatives Library: Structured products : volume1, exotic options ; interst rates & currency by : Satyajit Das
Download or read book Swaps & Financial Derivatives Library: Structured products : volume1, exotic options ; interst rates & currency written by Satyajit Das and published by . This book was released on 2006 with total page 1310 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Das Swaps & Financial Derivatives Library - Third Edition Revised is the successor to Swaps & Financial Derivatives, which was first published in 1989 (as Swap Financing).
Book Synopsis A Finite-element Approach for Pricing Swing Options Under Stochastic Volatility by : Muhu Wang
Download or read book A Finite-element Approach for Pricing Swing Options Under Stochastic Volatility written by Muhu Wang and published by . This book was released on 2010 with total page 174 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Electricity Swing Option Pricing by Stochastic Bilevel Optimization: a Survey and New Approaches by : Raimund M. Kovacevic
Download or read book Electricity Swing Option Pricing by Stochastic Bilevel Optimization: a Survey and New Approaches written by Raimund M. Kovacevic and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
