Optimal Commodity Trading with a Capacitated Storage Asset

Published Online:https://doi.org/10.1287/mnsc.1090.1049

References

  • Bellman R. On the theory of dynamic programming—A warehousing problem. Management Sci. (1956) 2:272–275LinkGoogle Scholar
  • Bertsekas D. P.Dynamic Programming and Optimal Control (2000) I3rd ed.(Athena Scientific, Belmont, MA) Google Scholar
  • Bopp A. E., Kannan V. R., Palocsay S. W., Stevens S. An optimization model for planning natural gas purchases, transportation, storage and deliverability. Omega (1996) 24:511–522CrossrefGoogle Scholar
  • Byers J. W. Commodity storage valuation: A linear optimization based on traded instruments. Energy Econom. (2006) 28:275–287CrossrefGoogle Scholar
  • Cahn A. S. The warehouse problem. Bull. Amer. Math. Soc. (1948) 54:1073Google Scholar
  • Charnes A., Cooper W. W. Generalization of the warehousing problem. Oper. Res. Quart. (1955) 6:131–172CrossrefGoogle Scholar
  • Charnes A., Drèze J., Miller M. Decision and horizon rules for stochastic planning problems: A linear example. Econometrica (1966) 34:307–330CrossrefGoogle Scholar
  • de Jong C., Walet K. Gas storage management. Managing Energy Price Risk (2004) 3rd ed.(Risk Publications, London) 631–647Google Scholar
  • Dreyfus S. E. An analytic solution of the warehouse problem. Management Sci. (1957) 4:99–104LinkGoogle Scholar
  • Duffie D.Dynamic Asset Pricing Theory (2001) (Princeton University Press, Princeton, NJ) Google Scholar
  • Federal Energy Regulatory Commission Current state of and issues concerning underground natural gas storage. (2004) . Staff Report, Docket AD04-11-000, Federal Energy Regulatory Commission, Washington, DCGoogle Scholar
  • Federgruen A., Zipkin P. H. An inventory model with limited production capacity and uncertain demands II: The discounted-cost criterion. Math. Oper. Res. (1986) 11:208–215LinkGoogle Scholar
  • Gavirneni S. Periodic review inventory control with fluctuating purchasing costs. Oper. Res. Lett. (2004) 32:374–379CrossrefGoogle Scholar
  • Geman H.Commodities and Commodity Derivatives: Modeling and Pricing for Agriculturals, Metals and Energy (2005) (John Wiley & Sons, Chichester, UK) Google Scholar
  • Goel A., Gutierrez G. Integrating commodity markets in the optimal procurement policies of a stochastic inventory system. (2008) . Working paper, University of Texas, AustinGoogle Scholar
  • Haksoz C., Seshadri S. Supply chain operations in the presence of spot market: A review with discussion. J. Oper. Res. Soc. (2007) 58:1412–1429CrossrefGoogle Scholar
  • Heyman D. P., Sobel M. J.Stochastic Models in Operations Research: Volume II, Stochastic Optimization (2004) (Dover Publications, Mineola, NY) Google Scholar
  • Hull J. C.Options, Futures, and Other Derivatives Securities (2000) (Prentice Hall, Englewood Cliffs, NJ) Google Scholar
  • Jaillet P., Ronn E. I., Tompaidis S. Valuation of commodity-based swing options. Management Sci. (2004) 50:909–921LinkGoogle Scholar
  • Kapuscinski R., Tayur S. Capacitated production-inventory model with periodic demand. Oper. Res. (1998) 46:899–911LinkGoogle Scholar
  • Knowles T. W., Wirick J. P. The Peoples Gas Light and Coke Company plans gas supply. Interfaces (1998) 28:1–12LinkGoogle Scholar
  • Kobasa J. D., Tek M. R. Management's perspective on underground gas storage. Underground Storage of Natural Gas: Theory and Practice (1988) (Kluwer Academic Publishers, Norwell, MA) 3–13Google Scholar
  • Lai G., Wang M. X., Kekre S., Scheller-Wolf A., Secomandi N. Valuation of downstream liquefied-natural-gas storage. (2009) . Working Paper 2006-E99, Tepper School of Business, Carnegie Mellon University, PittsburghGoogle Scholar
  • Levary R. R., Dean B. V. A natural gas flow model under uncertainty in demand. Oper. Res. (1980) 28:1360–1374LinkGoogle Scholar
  • Luenberger D. G.Investment Science (1998) (Oxford University Press, New York) Google Scholar
  • Manoliu M. Storage options valuation using multilevel trees and calendar spreads. Internat. J. Theoret. Appl. Finance (2004) 7:425–464CrossrefGoogle Scholar
  • Maragos S., Ronn E. Valuation of the operational flexibility of natural gas storage reservoirs. Real Options and Energy Management Using Options Methodology to Enhance Capital Budgeting Decisions (2002) (Risk Publications, London) 431–456Google Scholar
  • Müller A. Stochastic ordering of multivariate normal distributions. Ann. Inst. Statist. Math. (2001) 53:567–577CrossrefGoogle Scholar
  • Porteus E. L.Foundations of Stochastic Inventory Theory (2002) (Stanford Business Books, Stanford, CA) CrossrefGoogle Scholar
  • Puterman M. L.Markov Decision Processes: Discrete Stochastic Dynamic Programming (1994) (John Wiley & Sons, New York) CrossrefGoogle Scholar
  • Ross S. A. Hedging long run commitments: Exercises in incomplete market pricing. Econom. Notes (1997) 26:385–420Google Scholar
  • Routledge B., Seppi D. J., Spatt C. Equilibrium forward curves for commodities. J. Finance (2000) 55:1297–1338CrossrefGoogle Scholar
  • Scheller-Wolf A., Tayur S., Tayur M. M. S., Ganeshan R. Managing supply chains in emerging markets. Quantitative Models for Supply Chain Management (1998) (Kluwer Academic Publishers, Boston) 703–735Google Scholar
  • Schwartz E. S. The stochastic behavior of commodity prices: Implications for valuation and hedging. J. Finance (1997) 52:923–973CrossrefGoogle Scholar
  • Schwartz E. S., Smith J. E. Short-term variations and long-term dynamics in commodity prices. Management Sci. (2000) 46:893–911LinkGoogle Scholar
  • Seppi D. J., Ronn E. Risk-neutral stochastic processes for commodity derivative pricing: An introduction and survey. Real Options and Energy Management Using Options Methodology to Enhance Capital Budgeting Decisions (2002) (Risk Publications, London) 3–60Google Scholar
  • Smith J. E. Alternative approaches for solving real-options problems. Decision Anal. (2005) 2:89–102LinkGoogle Scholar
  • Smith J. E., McCardle K. F. Options in the real world: Lessons learned in evaluating oil and gas investments. Oper. Res. (1999) 47:1–15LinkGoogle Scholar
  • Song J.-S., Zipkin P. Inventory control in a fluctuating demand environment. Oper. Res. (1993) 41:351–370LinkGoogle Scholar
  • Tek M. R.Natural Gas Underground Storage: Inventory and Deliverability (1996) (PennWell Publishing, Tulsa, OK) Google Scholar
  • Topkis D. M.Supermodularity and Complementarity (1998) (Princeton University Press, Princeton, NJ) CrossrefGoogle Scholar
  • Trigeorgis L.Real Options: Managerial Flexibility and Strategy in Resource Allocation (1996) (MIT Press, Cambridge, MA) Google Scholar
  • Van Mieghem J. A. Capacity management, investment and hedging: Review and recent developments. Manufacturing Service Oper. Management (2003) 5:269–302LinkGoogle Scholar
  • Wang M. X. Supply chain management and economic valuation of real options in the natural gas and liquefied natural gas industry. (2008) . Ph.D. thesis, Tepper School of Business, Carnegie Mellon University, PittsburghGoogle Scholar
  • Webster's New Universal Unabridged Dictionary (1996) (Barnes & Noble, New York) Google Scholar
  • Weston T., Ronn E. Applying stochastic dynamic programming to the valuation of gas storage and generation assets. Real Options and Energy Management Using Options Methodology to Enhance Capital Budgeting Decisions (2002) (Risk Publications, London) 183–216Google Scholar
  • Williams J. C., Wright B. D.Storage and Commodity Markets (1991) (Cambridge University Press, Cambridge, UK) CrossrefGoogle Scholar
  • Yang J. Production control in the face of storable raw material, random supply, and an outside market. Oper. Res. (2004) 52:293–311LinkGoogle Scholar
  • Zipkin P. H.Foundations of Inventory Management (2000) (McGraw-Hill, Boston) Google Scholar
INFORMS site uses cookies to store information on your computer. Some are essential to make our site work; Others help us improve the user experience. By using this site, you consent to the placement of these cookies. Please read our Privacy Statement to learn more.