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arXiv · 1205.2302

The Valuation of Clean Spread Options: Linking Electricity, Emissions and Fuels

Rene Carmona·Michael Coulon·Daniel Schwarz
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Abstract

The purpose of the paper is to present a new pricing method for clean spread options, and to illustrate its main features on a set of numerical examples produced by a dedicated computer code. The novelty of the approach is embedded in the use of structural models as opposed to reduced-form models which fail to capture properly the fundamental dependencies between the economic factors entering the production process.

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Rene Carmona, Michael Coulon, Daniel Schwarz. 2012-05-10. The Valuation of Clean Spread Options: Linking Electricity, Emissions and Fuels. https://doi.org/10.1080/14697688.2012.750733

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