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Hanfeld, Marc
Schlüter, Stephan
Year of Publication: 
Series/Report no.: 
FAU Discussion Papers in Economics 10/2016
We investigate, if it pays off for a company to invest into complex swing option algorithms. We first introduce least squares Monte Carlo as a complex valuation algorithm and explain in detail how it works. Using a simulation study and two backtest scenarios we compare the output of this method with a simple myopic approach, and evaluate the results also from a business point of view. We find that myopic operation performs fairly well, but given a certain contract size and a certain contract flexibility, LSMC clearly prevails.
Swing Option
Spot Optimization
Least Squares Monte Carlo
Document Type: 
Working Paper

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