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6 May 09
Author: Les Clewlow, Chris Strickland, Doug Meador, Ron Sobey
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For many participants involved in power trading such as energy merchants, utilities, banks, and other investment companies, accurate valuation of generation assets and their associated risk calculations is crucial. Not only does rigorous valuation provide a more accurate view of a portfolio’s current value, it also affects the ability to properly manage and hedge the risks associated with generation assets.
In this article, we detail a number of different ways in which industry practitioners typically value the flexibility of generation assets as real options whilst taking into account the constraints in operating the plant.
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