Seminario: “Real Options and Corn Ethanol - a microcosm for energy finance?”

Martedì 14 Maggio 2019, ore 11:30, Sala Riunioni 701 - Matt Davison


Martedì 14 Maggio 2019, alle ore 11:30 in Sala Riunioni 701, Matt Davison (Professor of Applied Mathematics and Statistical & Actuarial Sciences - Dean of Science, Western University Canada, London Ontario) terrà un seminario dal titolo “Real Options and Corn Ethanol - a microcosm for energy finance?”.

In North America, corn ethanol is often blended with gasoline. As such, an ethanol production facility can be considered as a real option on the spread between the market price of corn and the market price of gasoline or ethanol fuel. Over the last decade or so I've been thinking about these real options and pricing them, beginning with the most naïve models (Margrabe option on gasoline/corn spread) and gradually adding complexity.
My group has considered details like:
1) incorporating the cost of idling and starting the plants with the resulting hysteresis in operating policies.
2) considering the impact of uncertainty in government subsidies
3) considering the correlation between corn and fuel costs that has arisen as a result of this market becoming large and, most recently,
4) considering the impact of competition between ethanol producers in light of regulatory mandates (i.e. the blending wall).
I believe that the issues considered here represent a microcosm for the field of energy finance as a whole, and will take some time to consider such connections.