Journal of Real Options and Strategy
Online ISSN : 1884-1635
Print ISSN : 1881-5774
ISSN-L : 1881-5774
Volume 12
Displaying 1-2 of 2 articles from this issue
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  • Misao Endo
    2020 Volume 12 Pages 1-15
    Published: 2020
    Released on J-STAGE: December 21, 2020
    JOURNAL FREE ACCESS

    This paper proposes a simple method to evaluate swing option of fuel index-linked PPA. Swing option will be assumed as a bundle of European option straddle by considering the most frequently used full swing option and using the oil forward curve as the fuel index. Based on such assumption, swing option will be evaluated by Monte Carlo simulation under risk-neutral measure obtained from TOCOM electricity futures market. As a result, the possibility of LNG shortage and surplus is provided. Power generation companies must hedge their LNG position properly to avoid any loss incurred from execution of option by retail companies.

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