ReportTitle:Valuation and Optimisation of Natural Gas Storage Facilities under Time-inhomogeneous Lévy Processes
Reporter(Institution):Prof. Colin Atkinson(University of Cambridge)
Time:02:00.pm,20th May, 2016
Location:B-201, Building of Economics & Management, JiulonghuCampus
Abstract:
We analyse a stochastic control problem for the valuation of a natural gas storage facility while taking into account operating characteristics. The underlying natural gas spot price dynamics is assumed to follow a time-inhomogeneous exponential Lévy process. This underlying incorporates common features of gas spot prices such as seasonality, mean-reversion and price spikes with seasonal jump intensities. The corresponding HJB equation is the nonlinear PIDE which is solved by an explicit finite difference method. The numerical approach gives us both the value of the storage contract and optimal operating strategy depending on the gas price, current level of gas in the storage and time. The effects of seasonality and seasonal jump intensity are investigated by observing the surfaces of control strategies and contract values.
