An Evaluation of Italian Electricity Generation Assets Using a Spark Spread Option Model

11 Pages Posted: 26 Aug 2009

See all articles by Alessandro Mauro

Alessandro Mauro

MKS; University of Geneva - Geneva School of Economics and Management

Rosario Sgarioto

affiliation not provided to SSRN

Date Written: June 21-22, 2001

Abstract

This paper analyzes past and future values of the Spark Spread in Italy, showing how power generation assets can be evaluated using a Spark Spread option model. Variable costs and the organization of the electricity pool is discussed and, through an option-based simulation model, price volatility and power generation assets values are calculated, comparing the results against the traditional discounted cash flow methodology (DCF).

La versione in lingua italiano di questo paper si trova in http://ssrn.com/abstract=2028944

Keywords: spark spread, real options, Margrabe's option model, power generation, electricity markets, electricity pool, electricity assets, merchant power plant, discounted cash flow methodology

JEL Classification: D46, G13, L94

Suggested Citation

Mauro, Alessandro and Sgarioto, Rosario, An Evaluation of Italian Electricity Generation Assets Using a Spark Spread Option Model (June 21-22, 2001). Available at SSRN: https://ssrn.com/abstract=1461493 or http://dx.doi.org/10.2139/ssrn.1461493

University of Geneva - Geneva School of Economics and Management ( email )

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Bd du Pont-d'Arve 40
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Switzerland

Rosario Sgarioto

affiliation not provided to SSRN ( email )

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