EconStor >
Friedrich-Alexander-Universität Erlangen-Nürnberg (FAU) >
Institut für Wirtschaftspolitik und Quantitative Wirtschaftsforschung (IWQW), Universität Erlangen-Nürnberg >
IWQW Discussion Paper Series, FAU Erlangen-Nürnberg >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/30184
  

Full metadata record

DC FieldValueLanguage
dc.contributor.authorSchlüter, Stephanen_US
dc.contributor.authorDavison, Matten_US
dc.date.accessioned2010-03-19en_US
dc.date.accessioned2010-03-26T15:53:24Z-
dc.date.available2010-03-26T15:53:24Z-
dc.date.issued2010en_US
dc.identifier.urihttp://hdl.handle.net/10419/30184-
dc.description.abstractIn this article we present both a theoretical framework and a solved example for pricing an European gas storage facility and computing the optimal strategy for its operation. As a representative price index we choose the Dutch TTF day-ahead gas price. We present statistical evidence that the volatility of this index is time-varying, so we introduce a new continuous-time model by incorporating GARCH diffusion into an Ornstein-Uhlenbeck process. Based on this price process we use dynamic programming methods to derive partial differential equations for pricing a storage facility. As an example we apply our methodology to a storage site located in Epe at the German-Dutch border. In this context we investigate the effects of multiple contract types, and perform a sensitivity analysis for all model parameters. We obtain a value surface displaying the properties of a financial straddle. Both volatility and mean reversion influence the facility value - but only around the long-run mean of the gas price. The terminal condition, which includes information about the contract provisions, is of importance if it contains e.g. penalty terms for low inventory levels. Otherwise its influence is diminishing for increasing lease periods.en_US
dc.language.isoengen_US
dc.publisherUniv., Inst. für Wirtschaftspolitik und Quantitative Wirtschaftsforschung Erlangenen_US
dc.relation.ispartofseriesIWQW discussion paper series 02/2010en_US
dc.subject.jelC31en_US
dc.subject.jelC61en_US
dc.subject.ddc330en_US
dc.subject.keywordTTF gas priceen_US
dc.subject.keywordGARCH diffusionen_US
dc.subject.keywordnatural gas storageen_US
dc.subject.keyworddynamic computingen_US
dc.subject.stwErdgasvorkommenen_US
dc.subject.stwTanklageren_US
dc.subject.stwGaspreisen_US
dc.subject.stwARCH-Modellen_US
dc.subject.stwBetriebliche Preispolitiken_US
dc.subject.stwDynamische Optimierungen_US
dc.subject.stwTheorieen_US
dc.titlePricing an European gas storage facility using a continuous-time spot price model with GARCH diffusionen_US
dc.typeWorking Paperen_US
dc.identifier.ppn621625825en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-
dc.identifier.repecRePEc:zbw:iwqwdp:022010-
Appears in Collections:IWQW Discussion Paper Series, FAU Erlangen-Nürnberg

Files in This Item:
File Description SizeFormat
621625825.pdf343.58 kBAdobe PDF
No. of Downloads: Counter Stats
Show simple item record
Download bibliographical data as: BibTeX

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.