Stochastic control problems in energy markets
File(s)
Author(s)
Safarov, Nemat
Type
Thesis
Abstract
In this thesis we analyse stochastic control problems for the valuation of a
natural gas storage facility and natural gas-fi red power station while taking
into account their operating characteristics. In the gas storage problem
the underlying spot price dynamics is a mean-reverting process driven by a
time-inhomogeneous Levy process. For the power valuation both electricity
and gas spot price processes exhibit mean-reverting spikes and Markov
regime-switches. The Levy regime-switching model incorporates the effects
of demand-supply
uctuations in energy markets and abrupt economic disruptions
or business cycles. We make use of skewed Levy copulas to model
the dependence risk of electricity and gas jumps. The corresponding HJB
equations are solved by an explicit finite difference method. The numerical
approach gives us both the values of the facilities and their optimal operating
strategies depending on the gas and electricity prices, storage level,
current temperature of the boiler and time. The surfaces of control strategies
and contract values are obtained by implementing the numerical method
for particular examples.
natural gas storage facility and natural gas-fi red power station while taking
into account their operating characteristics. In the gas storage problem
the underlying spot price dynamics is a mean-reverting process driven by a
time-inhomogeneous Levy process. For the power valuation both electricity
and gas spot price processes exhibit mean-reverting spikes and Markov
regime-switches. The Levy regime-switching model incorporates the effects
of demand-supply
uctuations in energy markets and abrupt economic disruptions
or business cycles. We make use of skewed Levy copulas to model
the dependence risk of electricity and gas jumps. The corresponding HJB
equations are solved by an explicit finite difference method. The numerical
approach gives us both the values of the facilities and their optimal operating
strategies depending on the gas and electricity prices, storage level,
current temperature of the boiler and time. The surfaces of control strategies
and contract values are obtained by implementing the numerical method
for particular examples.
Version
Open Access
Date Issued
2016-12
Date Awarded
2017-11
Copyright Statement
Attribution NoDerivatives 4.0 International Licence (CC BY-ND)
Advisor
Atkinson, Colin
Publisher Department
Mathematics
Publisher Institution
Imperial College London
Qualification Level
Doctoral
Qualification Name
Doctor of Philosophy (PhD)