Gas storage valuation and hedging. A quantification of the model risk.

Patrick Henaff, Ismail Laachir and Francesco Russo

march, 2018

Publication type:

Paper in peer-reviewed journals

Journal:

International Journal of Financial Studies. Special Issue "Finance, Financial Risk Management and their Applications"., vol. 6(1), pp. 27

External link:

http://www.mdpi.com/2227-7072/6/1/27/html

DOI:

10.3390/ijfs6010027

HAL:

hal-00918082

arXiv:

1312.3789

Keywords :

Energy markets; commodities; natural gas storage; model uncertainty.

Abstract:

This paper focuses on the valuation and hedging of gas storage facilities, using a spot-based valuation framework coupled with a financial hedging strategy implemented with futures contracts. The first novelty consist in proposing a model that unifies the dynamics of the futures curve and the spot price, which accounts for the main stylized facts of the US natural gas market, such as seasonality and presence of price spikes. The second aspect of the paper is related to the quantification of model uncertainty related to the spot dynamics.

BibTeX:

@article{Hen-Laa-Rus-2018,
    author={Patrick Henaff and Ismail Laachir and Francesco Russo },
    title={Gas storage valuation and hedging. A quantification of the 
           model risk. },
    doi={10.3390/ijfs6010027 },
    journal={International Journal of Financial Studies. Special Issue 
           "Finance, Financial Risk Management and their Applications". },
    year={2018 },
    month={3},
    volume={6(1) },
    pages={27},
}