Department of Mathematics

Speaker: Shijie Deng
Title: Pricing and Optimal Exercise of Swing Options Under Alternative Stochastic Price Models
Affiliation: Georgia Institute of Technology
Date: Friday, April 28, 2017
Place and Time: Room 101, Love Building, 3:35-4:30 pm
Refreshments: Room 204, Love Building, 3:00 pm

Abstract. Swing options are commonly used in the energy industries such as the natural gas and electricity industries for energy marketers and service providers alike to manage their convoluted risk exposure to the fluctuating energy price and the end customers' consumption quantities. We discuss the pricing of several variations of swing options with a variety of underlying spot price models. Discrete and continuous time formulations are illustrated and the respective optimal policies of some quintessential examples are contrasted to highlight the conventional features of each formulation. We review the prominent valuation approaches based on stochastic dynamic programming, while providing examples in the context of a recent approach, the PROJ method, which applies broadly to exotic option pricing.