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Keywords = European continuous installment options

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27 pages, 450 KB  
Article
Pricing European and American Installment Options
by Joanna Goard and Mohammed AbaOud
Mathematics 2022, 10(19), 3494; https://doi.org/10.3390/math10193494 - 25 Sep 2022
Cited by 1 | Viewed by 2149
Abstract
This paper derives accurate and efficient analytic approximations for the prices of both European and American continuous-installment call and put options. The solutions are in the form of series in time-to-expiry with explicit formulae for the coefficients provided. Unlike other solutions for installment [...] Read more.
This paper derives accurate and efficient analytic approximations for the prices of both European and American continuous-installment call and put options. The solutions are in the form of series in time-to-expiry with explicit formulae for the coefficients provided. Unlike other solutions for installment options, no Laplace inverses are needed, and there is no need to solve complex, recursive systems or integral equations. The formulae provided fast yield and accurate solutions not just for the prices, but also for the critical boundaries. We also compare the solutions with those obtained using an existing method and show that it surpasses it delivering more correct option prices and critical stock prices. Full article
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24 pages, 3987 KB  
Article
Old Wind Farm Life Extension vs. Full Repowering: A Review of Economic Issues and a Stochastic Application for Spain
by Luis M. Abadie and Nestor Goicoechea
Energies 2021, 14(12), 3678; https://doi.org/10.3390/en14123678 - 20 Jun 2021
Cited by 22 | Viewed by 5519
Abstract
The installation of wind power technology is growing steadily and the trend can be expected to continue if the objectives proposed by the European Commission are to be achieved. In some countries a considerable percentage of installed wind power capacity is near the [...] Read more.
The installation of wind power technology is growing steadily and the trend can be expected to continue if the objectives proposed by the European Commission are to be achieved. In some countries a considerable percentage of installed wind power capacity is near the end of its useful lifetime. In the case of Spain, the figure is 50% within five years. Over the last 20 years, wind energy technology has evolved considerably and the expected capacity factor has improved, thus increasing annual energy production, and capital expenditure and operational expenditure have decreased substantially. This paper studies the optimal decision under uncertainty between life extension and full repowering for a generic wind farm installed in the Iberian Peninsula when the future hourly electricity prices and the capacity factor evolve stochastically and seasonally. The results show that in economic terms, full repowering is the best option, with a net present value of €702,093 per MW installed, while reblading is the second best option. The methodology can be transferred to other specific wind farms in different electricity markets and can be used to develop national wind energy policy recommendations to achieve projected shares in the electricity mix. Full article
(This article belongs to the Special Issue Advances in Sustainable Energy and Environmental Economics)
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