Monte Carlo valuation of natural gas investments
AbstractIn this evaluation of energy assets related to natural gas, our particular focus is on a base load natural gas combined cycle power plant and a liquefied natural gas facility in a realistic setting. We also value several American-type investment options following the least squares Monte Carlo approach. We calibrate mean-reverting stochastic processes for gas and electricity prices by using data from NYMEX NG futures contracts and the Spanish wholesale electricity market, respectively. Additional sources of uncertainty concern the initial investment outlay, or the option's time to maturity, or the cost of CO2 emission permits.
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Bibliographic InfoArticle provided by Elsevier in its journal Review of Financial Economics.
Volume (Year): 18 (2009)
Issue (Month): 1 (January)
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Web page: http://www.elsevier.com/locate/inca/620170
Real options Power plants Stochastic revenues and costs CO2 allowances LNG;
Other versions of this item:
- C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
- E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- G3 - Financial Economics - - Corporate Finance and Governance
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