Real option valuation of power transmission investments by stochastic simulation
- Autores
- Pringles, Rolando Marcelo; Olsina, Fernando Gabriel; Garces, Francisco Felipe
- Año de publicación
- 2015
- Idioma
- inglés
- Tipo de recurso
- artículo
- Estado
- versión publicada
- Descripción
- Network expansions in power markets usually lead to investment decisions subject to substantial irreversibility and uncertainty. Hence, investors need valuing the flexibility to change decisions as uncertainty unfolds progressively. Real option analysis is an advanced valuation technique that enables planners to take advantage of market opportunities while preventing or mitigating losses if future conditions evolve unfavorably. In the past, many approaches for valuing real options have been developed. However, applying these methods to value transmission projects is often inappropriate as revenue cash flows are path-dependent and affected by a myriad of uncertain variables. In this work, a valuation technique based on stochastic simulation and recursive dynamic programming, called Least-Square Monte Carlo, is applied to properly value the deferral option in a transmission investment. The effect of option´s maturity, the initial outlay and the capital cost upon the value of the postponement option is investigated. Finally, sensitivity analysis determines optimal decision regions to execute, postpone or reject the investment projects.
Fil: Pringles, Rolando Marcelo. Consejo Nacional de Investigaciones Cientificas y Tecnicas. Centro Cientifico Tecnologico San Juan. Instituto de Energia Electrica; Argentina
Fil: Olsina, Fernando Gabriel. Consejo Nacional de Investigaciones Cientificas y Tecnicas. Ctro Cientifico Tecnologico Conicet - San Juan. Instituto de Energia Electrica; Argentina
Fil: Garces, Francisco Felipe. Consejo Nacional de Investigaciones Cientificas y Tecnicas. Centro Cientifico Tecnologico San Juan. Instituto de Energia Electrica; Argentina - Materia
-
FLEXIBILITY
INVESTMENTS
MONTE CARLO
POWER NETWORK
REAL OPTIONS
UNCERTAINTY - Nivel de accesibilidad
- acceso abierto
- Condiciones de uso
- https://creativecommons.org/licenses/by-nc-nd/2.5/ar/
- Repositorio
- Institución
- Consejo Nacional de Investigaciones Científicas y Técnicas
- OAI Identificador
- oai:ri.conicet.gov.ar:11336/5250
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Real option valuation of power transmission investments by stochastic simulationPringles, Rolando MarceloOlsina, Fernando GabrielGarces, Francisco FelipeFLEXIBILITYINVESTMENTSMONTE CARLOPOWER NETWORKREAL OPTIONSUNCERTAINTYhttps://purl.org/becyt/ford/5.2https://purl.org/becyt/ford/5Network expansions in power markets usually lead to investment decisions subject to substantial irreversibility and uncertainty. Hence, investors need valuing the flexibility to change decisions as uncertainty unfolds progressively. Real option analysis is an advanced valuation technique that enables planners to take advantage of market opportunities while preventing or mitigating losses if future conditions evolve unfavorably. In the past, many approaches for valuing real options have been developed. However, applying these methods to value transmission projects is often inappropriate as revenue cash flows are path-dependent and affected by a myriad of uncertain variables. In this work, a valuation technique based on stochastic simulation and recursive dynamic programming, called Least-Square Monte Carlo, is applied to properly value the deferral option in a transmission investment. The effect of option´s maturity, the initial outlay and the capital cost upon the value of the postponement option is investigated. Finally, sensitivity analysis determines optimal decision regions to execute, postpone or reject the investment projects.Fil: Pringles, Rolando Marcelo. Consejo Nacional de Investigaciones Cientificas y Tecnicas. Centro Cientifico Tecnologico San Juan. Instituto de Energia Electrica; ArgentinaFil: Olsina, Fernando Gabriel. Consejo Nacional de Investigaciones Cientificas y Tecnicas. Ctro Cientifico Tecnologico Conicet - San Juan. Instituto de Energia Electrica; ArgentinaFil: Garces, Francisco Felipe. Consejo Nacional de Investigaciones Cientificas y Tecnicas. Centro Cientifico Tecnologico San Juan. Instituto de Energia Electrica; ArgentinaElsevier2015-01info:eu-repo/semantics/articleinfo:eu-repo/semantics/publishedVersionhttp://purl.org/coar/resource_type/c_6501info:ar-repo/semantics/articuloapplication/pdfapplication/pdfapplication/pdfapplication/pdfhttp://hdl.handle.net/11336/5250Pringles, Rolando Marcelo; Olsina, Fernando Gabriel; Garces, Francisco Felipe; Real option valuation of power transmission investments by stochastic simulation; Elsevier; Energy Economics; 47; 1-2015; 215-2260140-9883enginfo:eu-repo/semantics/altIdentifier/url/http://www.sciencedirect.com/science/article/pii/S0140988314002965info:eu-repo/semantics/altIdentifier/doi/10.1016/j.eneco.2014.11.011info:eu-repo/semantics/openAccesshttps://creativecommons.org/licenses/by-nc-nd/2.5/ar/reponame:CONICET Digital (CONICET)instname:Consejo Nacional de Investigaciones Científicas y Técnicas2025-09-03T09:46:16Zoai:ri.conicet.gov.ar:11336/5250instacron:CONICETInstitucionalhttp://ri.conicet.gov.ar/Organismo científico-tecnológicoNo correspondehttp://ri.conicet.gov.ar/oai/requestdasensio@conicet.gov.ar; lcarlino@conicet.gov.arArgentinaNo correspondeNo correspondeNo correspondeopendoar:34982025-09-03 09:46:17.262CONICET Digital (CONICET) - Consejo Nacional de Investigaciones Científicas y Técnicasfalse |
dc.title.none.fl_str_mv |
Real option valuation of power transmission investments by stochastic simulation |
title |
Real option valuation of power transmission investments by stochastic simulation |
spellingShingle |
Real option valuation of power transmission investments by stochastic simulation Pringles, Rolando Marcelo FLEXIBILITY INVESTMENTS MONTE CARLO POWER NETWORK REAL OPTIONS UNCERTAINTY |
title_short |
Real option valuation of power transmission investments by stochastic simulation |
title_full |
Real option valuation of power transmission investments by stochastic simulation |
title_fullStr |
Real option valuation of power transmission investments by stochastic simulation |
title_full_unstemmed |
Real option valuation of power transmission investments by stochastic simulation |
title_sort |
Real option valuation of power transmission investments by stochastic simulation |
dc.creator.none.fl_str_mv |
Pringles, Rolando Marcelo Olsina, Fernando Gabriel Garces, Francisco Felipe |
author |
Pringles, Rolando Marcelo |
author_facet |
Pringles, Rolando Marcelo Olsina, Fernando Gabriel Garces, Francisco Felipe |
author_role |
author |
author2 |
Olsina, Fernando Gabriel Garces, Francisco Felipe |
author2_role |
author author |
dc.subject.none.fl_str_mv |
FLEXIBILITY INVESTMENTS MONTE CARLO POWER NETWORK REAL OPTIONS UNCERTAINTY |
topic |
FLEXIBILITY INVESTMENTS MONTE CARLO POWER NETWORK REAL OPTIONS UNCERTAINTY |
purl_subject.fl_str_mv |
https://purl.org/becyt/ford/5.2 https://purl.org/becyt/ford/5 |
dc.description.none.fl_txt_mv |
Network expansions in power markets usually lead to investment decisions subject to substantial irreversibility and uncertainty. Hence, investors need valuing the flexibility to change decisions as uncertainty unfolds progressively. Real option analysis is an advanced valuation technique that enables planners to take advantage of market opportunities while preventing or mitigating losses if future conditions evolve unfavorably. In the past, many approaches for valuing real options have been developed. However, applying these methods to value transmission projects is often inappropriate as revenue cash flows are path-dependent and affected by a myriad of uncertain variables. In this work, a valuation technique based on stochastic simulation and recursive dynamic programming, called Least-Square Monte Carlo, is applied to properly value the deferral option in a transmission investment. The effect of option´s maturity, the initial outlay and the capital cost upon the value of the postponement option is investigated. Finally, sensitivity analysis determines optimal decision regions to execute, postpone or reject the investment projects. Fil: Pringles, Rolando Marcelo. Consejo Nacional de Investigaciones Cientificas y Tecnicas. Centro Cientifico Tecnologico San Juan. Instituto de Energia Electrica; Argentina Fil: Olsina, Fernando Gabriel. Consejo Nacional de Investigaciones Cientificas y Tecnicas. Ctro Cientifico Tecnologico Conicet - San Juan. Instituto de Energia Electrica; Argentina Fil: Garces, Francisco Felipe. Consejo Nacional de Investigaciones Cientificas y Tecnicas. Centro Cientifico Tecnologico San Juan. Instituto de Energia Electrica; Argentina |
description |
Network expansions in power markets usually lead to investment decisions subject to substantial irreversibility and uncertainty. Hence, investors need valuing the flexibility to change decisions as uncertainty unfolds progressively. Real option analysis is an advanced valuation technique that enables planners to take advantage of market opportunities while preventing or mitigating losses if future conditions evolve unfavorably. In the past, many approaches for valuing real options have been developed. However, applying these methods to value transmission projects is often inappropriate as revenue cash flows are path-dependent and affected by a myriad of uncertain variables. In this work, a valuation technique based on stochastic simulation and recursive dynamic programming, called Least-Square Monte Carlo, is applied to properly value the deferral option in a transmission investment. The effect of option´s maturity, the initial outlay and the capital cost upon the value of the postponement option is investigated. Finally, sensitivity analysis determines optimal decision regions to execute, postpone or reject the investment projects. |
publishDate |
2015 |
dc.date.none.fl_str_mv |
2015-01 |
dc.type.none.fl_str_mv |
info:eu-repo/semantics/article info:eu-repo/semantics/publishedVersion http://purl.org/coar/resource_type/c_6501 info:ar-repo/semantics/articulo |
format |
article |
status_str |
publishedVersion |
dc.identifier.none.fl_str_mv |
http://hdl.handle.net/11336/5250 Pringles, Rolando Marcelo; Olsina, Fernando Gabriel; Garces, Francisco Felipe; Real option valuation of power transmission investments by stochastic simulation; Elsevier; Energy Economics; 47; 1-2015; 215-226 0140-9883 |
url |
http://hdl.handle.net/11336/5250 |
identifier_str_mv |
Pringles, Rolando Marcelo; Olsina, Fernando Gabriel; Garces, Francisco Felipe; Real option valuation of power transmission investments by stochastic simulation; Elsevier; Energy Economics; 47; 1-2015; 215-226 0140-9883 |
dc.language.none.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
info:eu-repo/semantics/altIdentifier/url/http://www.sciencedirect.com/science/article/pii/S0140988314002965 info:eu-repo/semantics/altIdentifier/doi/10.1016/j.eneco.2014.11.011 |
dc.rights.none.fl_str_mv |
info:eu-repo/semantics/openAccess https://creativecommons.org/licenses/by-nc-nd/2.5/ar/ |
eu_rights_str_mv |
openAccess |
rights_invalid_str_mv |
https://creativecommons.org/licenses/by-nc-nd/2.5/ar/ |
dc.format.none.fl_str_mv |
application/pdf application/pdf application/pdf application/pdf |
dc.publisher.none.fl_str_mv |
Elsevier |
publisher.none.fl_str_mv |
Elsevier |
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reponame:CONICET Digital (CONICET) instname:Consejo Nacional de Investigaciones Científicas y Técnicas |
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CONICET Digital (CONICET) |
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CONICET Digital (CONICET) |
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Consejo Nacional de Investigaciones Científicas y Técnicas |
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CONICET Digital (CONICET) - Consejo Nacional de Investigaciones Científicas y Técnicas |
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dasensio@conicet.gov.ar; lcarlino@conicet.gov.ar |
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13.13397 |