World Scientific-now publishers Series in Business > Real Options in Energy and Commodity Markets

Real Options in Energy and Commodity Markets

Nicola Secomandi, Carnegie Mellon University, USA,
Published: 01 Dec 2016
© 2016 N. Secomandi
Supply Chain Management
Energy and Commodity MarketsReal OptionsCommodity Storage and ShippingEmission MarketsMining OperationsHydrocarbon Cracking OperationsGasoline Portfolio OptimizationMarket EquilibriumMarket ImpactRisk-Neutral ValuationFinancial HedgingStochastic Optimization;Monte Carlo Simulation

Table of contents:
1. Theory
2. Commodity Prices and the Option Value of Storage;
3. A Capacitated Commodity Trading Model with Market Power
4. Methods and Applications
5. Stochastic Volatility Modeling of Emission Allowances Futures Prices in the European Union Emission Trading System Market
6. Optimal Exploitation of a Mineral Resource under Stochastic Market Prices
7. Real Option Management of Hydrocarbon Cracking Operation
8. Contract Portfolio Optimization for a Gasoline Supply Chain

Real Options in Energy and Commodity Markets

The field of real options is concerned with the management and financial valuation of operational flexibility in business endeavors. From the very outset, energy and commodity markets — which play fundamental roles in the worldwide economy — have provided a relevant context for real option analysis, both in theory and practice.

This volume is a collection of six chapters covering recent research on real options in energy and commodity markets, reflecting the significance of these markets for real option analysis. The volume is divided into two parts — the first on theory and the second on methods and applications.

The two chapters in the first part of the book respectively address commodity storage and the concept of convenience yield, and how the management of real options can be impacted by the trader's own market decisions in the context of commodity shipping.

The four chapters in the second part of the book propose and apply real option models in various domains — modeling the evolution of futures prices of emission certificates; managing copper extraction illustrated with an application to a project at Codelco, Chile, the largest copper producer in the world; the core ideas behind real option analysis in the context of the merchant management of hydrocarbon cracking operations; and optimizing the portfolio of contracts that oil refineries use to market their gasoline production.

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