The Pricing and Hedging of Multi-Factor Multi-Commodity Based Swing Options

Funding: 2007: $107,000
2008: $107,000
2009: $109,000

Funding or Partner Organisation: Australian Research Council (ARC Linkage Projects)
Lacima Group (Lacima Group Pty. Ltd.)

Start year: 2007

Summary: This project will apply recent advances in Monte Carlo simulation techniques and sparse grid methods to develop valuation and hedging strategies that will allow the better risk management of swing options written on several underlying assets and with multiple sources of risk driving quite general specifications for the price dynamics of the underlying assets. The models developed will be applied by the partner organisation, Lacima Group Pty. Ltd. to value and hedge electricity and gas contracts currently being traded in Australia.'',

Publications:

Chiarella, C, Clewlow, L & Kang, B 2011, 'The Evaluation of Multiple Year Gas Sales Agreement with Regime Switching', International Journal of Theoretical and Applied Finance, vol. 19, no. 1, pp. 1-25.
View/Download from: Publisher's site

Keywords: Energy Markets, Swing Options, Spot price models, Monte Carlo simulation, Sparse grid methods, Forward Curve Models,

FOR Codes: Finance, Stochastic Analysis and Modelling, Finance and investment services, Finance Services

Acknowledgement of Country

UTS acknowledges the Gadigal people of the Eora Nation, the Boorooberongal people of the Dharug Nation, the Bidiagal people and the Gamaygal people, upon whose ancestral lands our university stands. We would also like to pay respect to the Elders both past and present, acknowledging them as the traditional custodians of knowledge for these lands.