2016 | OriginalPaper | Chapter
Numerical Methods
Author : Daniel Mahoney
Published in: Modeling and Valuation of Energy Structures
Publisher: Palgrave Macmillan UK
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Spread options are pervasive in energy markets. While we must refer the reader to EW for a complete treatment of the various structures that entail such optionality, for context we will outline a few examples here, stressing that other, more mathematical, issues are the central focus here. To recap, examples include: Tolling/heat rate options: a right to buy fuel and sell powerTransport: a right to flow natural gas from one location to anotherStorage: a right to buy natural gas in summer and sell it in winter.