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EBOOK
Author Abadie, L. M. (Luis Maria), 1953-
Title Investment in energy assets under uncertainty : numerical methods in theory and practice / L.M. Abadie, J.M. Chamorro.
Imprint London : Springer, 2013.

LOCATION CALL # STATUS MESSAGE
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LOCATION CALL # STATUS MESSAGE
 OHIOLINK SPRINGER EBOOKS    ONLINE  
View online
Author Abadie, L. M. (Luis Maria), 1953-
Series Lecture Notes in Energy, 2195-1284 ; volume 21
Lecture notes in energy ; v. 21. 2195-1284
Subject Real options (Finance)
Value investing.
Clean energy investment.
Energy industries -- Capital investments.
Alt Name Chamorro, J. M. (José M.),
Description 1 online resource (xv, 187 pages) : illustrations.
Contents Valuation made simple: No uncertainties, just time -- Theoretical foundations -- Analytical solutions -- Binomial lattices -- Finite difference methods -- Monte Carlo simulation -- Economic and technical background -- Valuation of energy assets: A single risk factor -- Valuation of energy assets: Two risk factors -- Valuation of energy assets: Three risk factors -- Value maximization and optimal management of energy assets.
Machine generated contents note: 1. Valuation Made Simple: No Uncertainties, Just Time -- 1.1. Some Preliminaries -- 1.1.1. Simple and Compound Interest -- 1.1.2. Discounting -- 1.2. Cash Flow Streams: Annuities, and Perpetuities -- 1.2.1. Annuities -- 1.2.2. Perpetual Annuities -- 1.2.3. Annuities and Perpetuities Under Continuous Compounding -- 1.2.4. Increasing Annuities -- 1.3. Management and Value -- 1.4. Dynamic Programming -- 1.4.1. Friendly Introduction: Charting the Shortest Route -- 1.4.2. Maximizing Profit from Mineral Extraction -- 1.4.3. Rigorous Exposition -- 1.5. Where Next-- References -- 2. Theoretical Foundations -- 2.1. Mean-Variance Analysis in a Single Period -- 2.1.1. Characteristics of Asset Returns -- 2.1.2. Characteristics of Portfolio Returns -- 2.1.3. Riskless Borrowing and Lending -- 2.2. Standard Capital Asset Pricing Model -- 2.3. Single-Period Risk-Neutral Pricing -- 2.3.1. State Prices -- 2.3.2. Risk-Neutral Valuation -- 2.4. Forward and Futures Markets -- 2.4.1. Primer -- 2.4.2. Futures Prices, Spot Prices, and Storage Costs -- References -- 3. Analytical Solutions -- 3.1. Stochastic Price Models -- 3.1.1. Geometric Brownian Motion -- 3.1.2. Inhomogenous Geometric Brownian Motion -- 3.2. Annuities and Futures Contracts Under the Above Processes -- 3.2.1. Annuities Under the GBM -- 3.2.2. Annuities Under the IGBM -- 3.2.3. Futures Contracts Under the GBM -- 3.2.4. Futures Contracts Under the IGBM -- 3.3. Fundamental Pricing Equation: The Perpetual Option -- 3.3.1. GBM -- 3.3.2. Example 1: Optimal Timing Under Certainty (Finite-Lived Option) -- 3.3.3. Example 2: Optimal Time to Invest Under a GBM -- 3.3.4. Example 3: Two correlated GBMs -- 3.3.5. IGBM -- 3.3.6. Example 4: Optimal Time to Invest Under an IGBM -- 3.4. Pricing Formulas for European Options -- References -- 4. Binomial Lattices -- 4.1. Introduction -- 4.2. Basic Setting: Binomial Lattice Under a GBM -- 4.2.1. Determining the Parameters of the Lattice -- 4.2.2. Finite-Lived Option to Invest -- 4.2.3. Extensions -- 4.2.4. Example 1: One Time Step Per Year -- 4.2.5. Example 2: One Hundred Time Steps Per Year -- 4.2.6. Example 3: Convergence to the Perpetual Option -- 4.2.7. Example 4: Decreasing Investment Cost (One Step Per Year) -- 4.2.8. Example 5: Decreasing Investment Cost (One Hundred Steps Per Year) -- 4.2.9. Example 6: Convergence to Perpetual Option (Decreasing Investment Cost) -- 4.3. Finite-Lived Option to Invest Under the IGBM -- 4.3.1. Example 7: One Time Step Per Year -- 4.3.2. Example 8: One Hundred Time Steps Per Year -- 4.3.3. Example 9: Convergence to the Perpetual Option -- 4.4. Bi-dimensional Binomial Lattices -- 4.4.1. Example 10: Two GBMs -- 4.4.2. Example 11: Two GBMs; Approximation to the Perpetual Option -- 4.4.3. Two IGBMs -- 4.4.4. Example 12: Two IGBMs, One Step Per Year -- 4.4.5. Example 13: Two IGBMs with One Thousand Steps -- 4.4.6. One GBM and One IGBM -- 4.5. Trinomial Lattice with Mean Reversion -- References -- 5. Finite Difference Methods -- 5.1. Introduction -- 5.2. Implicit Finite Difference Method -- 5.3. Explicit Finite Difference Method -- 5.4. Relationship with Lattice Models -- 5.5. Example 1: Valuation of a European Real Option -- 5.6. Crank-Nicolson Method -- 5.7. Example 2: Valuation of an American Put Option -- 5.8. Example 3: Valuation of a Long-Term American Put Option -- References -- 6. Monte Carlo Simulation -- 6.1. Introduction -- 6.2. Basic Setup: Only One GBM Underlying Variable -- 6.2.1. Use of Random Numbers -- 6.2.2. Example 1: Comparison with a GBM Annuity -- 6.2.3. Example 2: A GBM Annuity with Jump (Convergence to Perpetual Annuity) -- 6.2.4. Example 3: A GBM Annuity with Jump (φ = 0.50) -- 6.2.5. Example 4: Valuation of a European Option by Simulation -- 6.2.6. Variance Reduction Techniques -- 6.2.7. Example 5: Valuation of a European Option by Simulation with Sobol Low-discrepancy Sequences -- 6.3. Monte Carlo Simulation and American Options Valuation -- 6.3.1. Example 6: Valuation of an American Option by Simulation -- 6.3.2. Example 7: Valuation of an American Option by Simulation (Decreasing Investment Cost) -- 6.3.3. Example 8: The American Put Option by LSMC, Binomial Lattice, and Finite Differences -- 6.3.4. Example 9: Long-Term American Put (Three Approaches) -- 6.3.5. Example 10: An IGBM Underlying Variable -- 6.4. Case of Several Underlying Variables -- 6.4.1. Two GBMs:' The Cholesky Factorization -- 6.4.2. Example 11: One Hundred Steps Per Year, Two GBMs -- 6.4.3. Example 12: European Option with a GBM and an IGBM (with Stochastic Interest Rate) -- Appendix -- References -- 7. Economic and Technical Background -- 7.1. Introduction -- 7.2. Coal-Fired Power Plants -- 7.3. Natural Gas-Fired Stations -- 7.4. Gasification Plants -- 7.5. Wind Parks -- 7.6. Futures Markets -- References -- 8. Valuation of Energy Assets: A Single Risk Factor -- 8.1. Introduction -- 8.2. Case 1: An Advanced Gas/Oil Combined Cycle -- 8.3. Case 2: A New Scrubbed Coal-Fired Station -- 8.4. Case 3: An Oil Well -- 9. Valuation of Energy Assets: Two Risk Factors -- 9.1. Introduction -- 9.2. Case 1: An Advanced Gas/Oil Combined Cycle -- 9.3. Case 2: A New Scrubbed Coal-Fired Station -- 10. Valuation of Energy Assets: Three Risk Factors -- 10.1. Introduction -- 10.2. Case 1: An Advanced Gas/Oil Combined Cycle -- 10.3. Case 2: A New Scrubbed Coal-Fired Station -- 11. Value Maximization and Optimal Management of Energy Assets -- 11.1. Introduction -- 11.2. Case 1: A Natural Gas-Fired Power Plant ("On" or "Off"; no Switching Costs) -- 11.3. Case 2: A Coal-Fired Power Plant ("On" or "Off"; no Switching Costs) -- References.
Bibliography Note Includes bibliographical references and index.
Summary This book aims to provide a rigorous yet pragmatic approach to the valuation and management of investments in the energy sector. Time and uncertainty pervade most if not all issues relevant to energy assets. They run from the early stage of prototype and demonstration to the ultimate abandonment and decommissioning. Risk in particular appears in several areas; thus, one can distinguish technical risk from financial risk. Furthermore, the extent to which one can react to them is different (just think of price risk and regulation risk). Markets in general, and financial markets in particular, regularly put a price on a number of assets which differ in their return/risk characteristics. And academia has developed sound financial principles for valuation purposes in a number of contexts. Nonetheless, the physical characteristics of the assets involved also play a key role in their valuation if only because of the restrictions that they entail. There are some instances in which the practitioner/researcher is able to come up with an analytical solution to the valuation problem. Typically, however, these instances are limited because of their relying on stylized facts or idealized frameworks. Unfortunately, many relevant instances lack analytical solutions, so one must resort to numerical methods. The book clearly explains how to implement them in a meaningful way. Their usefulness is further enhanced when numerical estimates of relevant parameters are derived from actual market prices (as long as these are available and reliable). The book starts from the basics of valuation in a dynamic, certain context. The second part then considers uncertainty and introduces a number of useful results and tools to grapple effectively with it. The last part applies these tools to the valuation of energy assets in a sequential manner, i.e. by considering one, two and three sources of risk. The last chapter provides examples of joint optimal management and value maximization in conventional power plants.
Note Online resource; title from PDF title page (SpringerLink, viewed November 18, 2013).
ISBN 9781447155928 (electronic bk.)
1447155920 (electronic bk.)
1447155912
9781447155911
9781447155911
ISBN/ISSN 10.1007/978-1-4471-5592-8
OCLC # 867651024



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