Since the 1990s power markets are being restructured worldwide and nowadays electrical power is traded as a commodity. The liberalization and with it the uncertainty in gas, fuel and electrical power prices requires an effective management of production facilities and financial contracts....

In this work, the valuation of energy-related financial contracts written on prices of flow commodities (such as natural gas, oil and electrical power) will be elaborated. Due to restrictions on storability of the underlying, the pricing of flow commodity derivatives is not trivial and thus...

We address a method for pricing electricity contracts based on the valuation of the ability to produce power, which is considered as the true underlying factor for electricity derivatives. This approach shows that an evaluation of free production capacity provides a framework where a...

A production-based approach is introduced to take into account different attitudes and liabilities of market participants to discuss the equilibrium day-ahead prices on electricity. Conditions ensuring the existence of the equilibrium are given and price distribution is considered. A discussion...

Optimal c ontrol problems of swit hing type with linear state dynamic s are ubiquitous in appli ations of sto hasti c optimization. For high-dimensional problems of this type, solutions whi h utilize some c onvexity related properties are useful. For su ch problems, we present novel algorithmic...

According to theoretical arguments, a properly designed emission trading system should help reaching pollution reduction at low social burden. Based on the theoretical work of environmental economists, cap-and-trade systems are put into operations all over the world. However, the practice from...

In industrial appli ations, optimal c ontrol problems frequently appear in the c ontext of dec isions-making under inc omplete information. In su ch framework, dec isions must be adapted dynami cally to acc ount for possible regime c hanges of the underlying dynamic s. Using sto hastic filtering...

Emissions trading markets have been touted as the most efficient mechanism to achieve environmental goals at least cost. Whether in the form of voluntary markets or in a mandatory framework like in the first phase of the European Union (EU) Emission Trading Scheme (ETS), the regulator sets a cap...

As a result of storability restrictions, the price risk management of flow commodities (such as natural gas, oil, and electrical power) is by no means a trivial matter.To protect price spikes, consumers purchase diverse swing-type contracts, whereas contract writers try to hedge themselves by...