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...