The valuation of clean spread options: Linking electricity, emissions and fuels

René Carmona, Michael Coulon, Daniel Schwarz

Research output: Contribution to journalArticle

11 Scopus citations

Abstract

The purpose of the paper is to present a new pricing method for clean spread options, and to illustrate its main features on a set of numerical examples produced by a dedicated computer code. The novelty of the approach is embedded in the use of a structural model as opposed to reduced-form models which fail to capture properly the fundamental dependencies between the economic factors entering the production process.

Original languageEnglish (US)
Pages (from-to)1951-1965
Number of pages15
JournalQuantitative Finance
Volume12
Issue number12
DOIs
StatePublished - Dec 1 2012

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics, Econometrics and Finance(all)

Keywords

  • Electricity markets
  • Emission markets
  • Real asset valuation
  • Spread options

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