Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/30184 
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dc.contributor.authorSchlüter, Stephanen
dc.contributor.authorDavison, Matten
dc.date.accessioned2010-03-19-
dc.date.accessioned2010-03-26T15:53:24Z-
dc.date.available2010-03-26T15:53:24Z-
dc.date.issued2010-
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
dc.language.isoengen
dc.publisher|aFriedrich-Alexander-Universität Erlangen-Nürnberg, Institut für Wirtschaftspolitik und Quantitative Wirtschaftsforschung (IWQW) |cNürnbergen
dc.relation.ispartofseries|aIWQW Discussion Papers |x02/2010en
dc.subject.jelC31en
dc.subject.jelC61en
dc.subject.ddc330en
dc.subject.keywordTTF gas priceen
dc.subject.keywordGARCH diffusionen
dc.subject.keywordnatural gas storageen
dc.subject.keyworddynamic computingen
dc.subject.stwErdgasvorkommenen
dc.subject.stwTanklageren
dc.subject.stwGaspreisen
dc.subject.stwARCH-Modellen
dc.subject.stwBetriebliche Preispolitiken
dc.subject.stwDynamische Optimierungen
dc.subject.stwTheorieen
dc.titlePricing an European gas storage facility using a continuous-time spot price model with GARCH diffusion-
dc.type|aWorking Paperen
dc.identifier.ppn621625825en
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen
dc.identifier.repecRePEc:zbw:iwqwdp:022010en

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