*2.4. Numerical Results*

Pricing swing contracts involves a large number of parameters and in this section we provide some results which illustrate the validity of our method across a variety of specifications. We assume that the underlying assets follow a risk neutral stochastic process, there are no transaction costs and other than penalties, there are no other constraints considered. We also assume a constant risk free rate of interest and the volatilities of all assets are known constant functions of time.

The option swing rights may be exercised at discrete times up to and including expiry and the volume choices given are in discrete amounts. That is, anytime the holder chooses to exercise a right, they must choose from a finite list of possible volume amounts. The rationale behind allowing all time steps to be exercise opportunities is the exponential growth in computational time caused by adding intermediate non-exercise times. However, the method can easily be modified to incorporate these extra time steps. As previously mentioned penalties can be implemented globally and are based on the net volume exercised during the contract.
