An Application of Financial Mathematics, Using Real Option Analysis, on Coal Production and Logistics

We present an application of Financial Mathematics (using Real Option Analysis) to value the inherent optionality a coal producer has when mining and processing thermal coal. The pay-off of the physical option can be modelled as a spread option, whereby both the underlyings, and more unusually, the strike all follow stochastic processes. The volatilities for each are modelled to be stochastic. We derive a lower bound approximation to value the inherent optionality and compare this to Monte Carlo simulation

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Year of publication:	[2022]
Authors:	Alfeus, Mesias ; Collins, James
Publisher:	[S.l.] : SSRN
Subject:	Realoptionsansatz \| Real options analysis \| Finanzmathematik \| Mathematical finance \| Theorie \| Theory \| Logistik \| Logistics \| Kohlenbergbau \| Coal mining

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