An Integrated CVaR and Real Options Approach to Investments in the Energy Sector

Fortin, Ines and Fuss, Sabine and Hlouskova, Jaroslava and Khabarov, Nikolay and Obersteiner, Michael and Szolgayova, Jana (May 2007) An Integrated CVaR and Real Options Approach to Investments in the Energy Sector. IHS Economics Series 209

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Abstract or Table of Contents

Abstract: The objective of this paper is to combine a real options framework with portfolio optimization techniques and to apply this new framework to investments in the electricity sector. In particular, a real options model is used to assess the adoption decision of particular technologies under uncertainty. These technologies are coal-fired power plants, biomassfired power plants and onshore wind mills, and they are representative of technologies based on fossil fuels, biomass and renewables, respectively. The return distributions resulting from this analysis are then used as an input to a portfolio optimization, where the measure of risk is the Conditional Value-at-Risk (CVaR).;

Item Type: IHS Series
Keywords: 'CVaR' 'Climate change policy' 'Uncertainty' 'Real options' 'Electricity' 'Investments'
Classification Codes (e.g. JEL): C61, D81, D92, G11, Q4, Q56, Q58, Portfolio optimization
Status: Published
Date Deposited: 26 Sep 2014 10:38
Last Modified: 22 Jul 2017 06:02
URI: http://irihs.ihs.ac.at/id/eprint/1770

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