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

René Carmona, Michael Coulon, Daniel Schwarz

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

Spread options are most oen used in the commodity and energy markets to encapsulate the protability of a production process by comparing the price of a rened product to the costs of production, including, but not limited to, the prices of the inputs to the production process. When the output commodity is electric power, such spread options are called spark spreads when the electricity is produced from natural gas, and dark spreads when the electricity is produced from coal. Both processes are the sources of Greenhouse Gas (GHG) emissions, in higher quantities for the latter than the former. In this paper we concentrate on the production of electricity and CO2 emissions and the resulting dependence structure between prices.

Original languageEnglish (US)
Title of host publicationCommodities
PublisherCRC Press
Pages645-666
Number of pages22
ISBN (Electronic)9781498712330
ISBN (Print)9781498712323
DOIs
StatePublished - Jan 1 2015

All Science Journal Classification (ASJC) codes

  • Economics, Econometrics and Finance(all)
  • Business, Management and Accounting(all)
  • Mathematics(all)

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