Short-Term Generation Asset Valuation: A Real Options Approach

@article{Tseng2002ShortTermGA,
  title={Short-Term Generation Asset Valuation: A Real Options Approach},
  author={Chung-Li Tseng and Graydon Barz},
  journal={Oper. Res.},
  year={2002},
  volume={50},
  pages={297-310}
}
This paper discusses using real options to value power plants with unit commitment constraints over a short-term period. We formulate the problem as a multistage stochastic problem and propose a solution procedure that integrates forward-moving Monte Carlo simulation with backward-moving dynamic programming. We assume that the power plant operator maximizes expected profit by deciding in each hour whether or not to run the unit, that a certain lead time for commitment and decommitment decisions… 

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