Optimal Energy Procurement in Spot and Forward Markets

Published Online:https://doi.org/10.1287/msom.2013.0473

References

  • Belak R (2011) Specifications of commodity and energy forward contracts provided via personal communication with the first author, June 6.Google Scholar
  • Berling P, Martínez-de-Albéniz V (2011) Optimal inventory policies when purchase price and demand are stochastic. Oper. Res. 59(1):109–124.LinkGoogle Scholar
  • Berling P, Rosling K (2005) The effects of financial risk on inventory policy. Management Sci. 51(12):1804–1815.LinkGoogle Scholar
  • Birge JR (2000) Option methods for incorporating risk into linear capacity planning models. Manufacturing Service Oper. Management 2(1):19–31.LinkGoogle Scholar
  • Black F (1976) The pricing of commodity contracts. J. Financial Econom. 3(1–2):167–179.CrossrefGoogle Scholar
  • Boyabatli O, Kleindorfer PR, Koontz SR (2011) Integrating long-term and short-term contracting in beef supply chains. Management Sci. 57(10):1771–1787.LinkGoogle Scholar
  • Bryant HL, Haigh MS (2004) Bid-ask spreads in commodity futures markets. Appl. Financial Econom. 14(13):923–936.CrossrefGoogle Scholar
  • Butler JC, Dyer JS (1999) Optimizing natural gas flows with linear programming and scenarios. Decision Sci. 30(2):563–580.CrossrefGoogle Scholar
  • Constantinides GM, Jackwerth JC, Perrakis S (2007) Option pricing: Real and risk-neutral distributions. Birge J, Linetsky V, eds. Financial Engineering, Handbooks in Operations Research and Management Science (Elsevier, Amsterdam), 565–591.CrossrefGoogle Scholar
  • Cox JC, Ingersoll JE, Ross SA (1981) The relation between forward prices and futures prices. J. Financial Econom. 9(4):321–346.CrossrefGoogle Scholar
  • Dixit AK, Pindyck RS (1994) Investment Under Uncertainty (Princeton University Press, Princeton, NJ).CrossrefGoogle Scholar
  • Gaur V, Seshadri S (2005) Hedging inventory risk through market instruments. Manufacturing Service Oper. Management 7(2):103–120.LinkGoogle Scholar
  • Gaur V, Seshadri S, Subrahmanyam MG (2007) Optimal timing of inventory decisions with price uncertainty. Leonard N. Stern School of Business, New York University, New York.Google Scholar
  • Gavirneni S (2004) Periodic review inventory control with fluctuating purchasing costs. Oper. Res. Lett. 32(4):374–379.CrossrefGoogle Scholar
  • Geman H (2005) Commodities and Commodity Derivatives: Modeling and Pricing for Agriculturals, Metals and Energy (John Wiley & Sons, Chichester, UK).Google Scholar
  • Goel A, Gutierrez G (2009) Integrating commodity markets in the optimal procurement policies of a stochastic inventory system. Working paper, Case Western Reserve University, Cleveland.Google Scholar
  • Graves S, Meal H, Dasu S, Qiu Y (1986) Two-stage production planning in a dynamic environment. Axsäter S, Schneeweiss C, Silver E, eds. Multi-Stage Production Planning and Inventory Control, Lecture Notes Economics and Mathematical Systems (Spinger-Verlag, Berlin), 9–43.CrossrefGoogle Scholar
  • Gurnani H, Tang CS (1999) Optimal ordering decisions with uncertain cost and demand forecast updating. Management Sci. 45(10):1456–1462.LinkGoogle Scholar
  • Hausman WH (1969) Sequential decision problems: A model to exploit existing forecasters. Management Sci. 16(2):B93–B111.LinkGoogle Scholar
  • Hausman WH, Peterson R (1972) Multiproduct production scheduling for style goods with limited capacity, forecasts revisions, and terminal delivery. Management Sci. 18(7):370–383.LinkGoogle Scholar
  • Heath D, Jackson PL (1994) Modeling the evolution of demand forecasts with application to safety stock analysis in production/distribution systems. IIE Trans. 26(3):17–30.CrossrefGoogle Scholar
  • Hull JC (2012) Options, Futures, and Other Derivatives Securities, 8th ed. (Prentice Hall, Englewood Cliffs, NJ).Google Scholar
  • Jaillet P, Ronn EI, Tompaidis S (2004) Valuation of commodity-based swing options. Management Sci. 50(7):909–921.LinkGoogle Scholar
  • Jouini E, Kallal H (1995) Martingales and arbitrage in securities markets with transaction costs. J. Econom. Theory 66(1):178–197.CrossrefGoogle Scholar
  • Kalymon BA (1971) Stochastic prices in a single-item inventory purchasing model. Oper. Res. 19(6):1434–1458.LinkGoogle Scholar
  • Kleindorfer PR (2008) Integrating physical and financial risk management in supply management. Geman H, ed. Risk Management in Commodity Markets: From Shipping to Agriculturals and Energy (John Wiley & Sons, Chichester, UK), 33–50.Google Scholar
  • Kleindorfer PR, Wu DJ (2003) Integrating long- and short-term contracting via business-to-business exchanges for capital-intensive industries. Management Sci. 49(11):1597–1615.LinkGoogle Scholar
  • Lai G, Wang MX, Kekre S, Scheller-Wolf A, Secomandi N (2011) Valuation of storage at a liquefied natural gas terminal. Oper. Res. 59(3):602–616.LinkGoogle Scholar
  • Li C-L, Kouvelis P (1999) Flexible and risk-sharing supply contracts under price uncertainty. Management Sci. 45(10):1378–1398.LinkGoogle Scholar
  • Linnainmaa JT, Roşu I (2009) Weather and time series determinants of liquidity in a limit order market. Working paper, Booth School of Business, University of Chicago, Chicago.CrossrefGoogle Scholar
  • Luenberger DG (1998) Investment Science (Oxford University Press, New York).Google Scholar
  • Muthuraman K, Aouam T, Rardin R (2008) Regulation of natural gas distribution using policy benchmarks. Oper. Res. 56(6):1131–1145.LinkGoogle Scholar
  • Nascimento JM, Powell WB (2009) An optimal approximate dynamic programming algorithm for the lagged asset acquisition problem. Math. Oper. Res. 34(1):210–237.LinkGoogle Scholar
  • Oum Y, Oren SS (2010) Optimal static hedging of volumetric risk in a competitive wholesale electricity market. Decision Anal. 7(1):107–122.LinkGoogle Scholar
  • Pilipovic D (2007) Energy Risk: Valuing and Managing Energy Derivatives, 2nd ed. (McGraw-Hill, New York).Google Scholar
  • Porteus EL (2002) Foundations of Stochastic Inventory Theory (Stanford Business Books, Stanford, CA).CrossrefGoogle Scholar
  • Ritchken PH, Tapiero CS (1986) Contingent claims contracting for purchasing decisions in inventory management. Oper. Res. 34(6):864–870.LinkGoogle Scholar
  • Roşu I (2009) A dynamic model of the limit order book. Rev. Financial Stud. 22(11):4601–4641.CrossrefGoogle Scholar
  • Seifert RW, Ulrich WT, Warren HH (2004) Optimal procurement strategies for online spot markets. Eur. J. Oper. Res. 152(3):781–799.CrossrefGoogle Scholar
  • Seppi D (2002) Risk-neutral stochastic processes for commodity derivative pricing: An introduction and survey. Ronn E, ed. Real Options and Energy Management Using Options Methodology to Enhance Capital Budgeting Decisions (Risk Publications, London), 3–60.Google Scholar
  • Shreve SE (2004) Stochastic Calculus for Finance II: Continuous-Time Models (Springer, New York).CrossrefGoogle Scholar
  • Sick G (1995) Real options. Jarrow RA, Maksimovic V, Ziemba WT, eds. Finance, Handbooks in Operations Research and Management Science (Elsevier, Amsterdam), 631–691.CrossrefGoogle Scholar
  • Smith JE (2005) Alternative approaches for solving real-options problems. Decisions Anal. 2(2):89–102.LinkGoogle Scholar
  • Smith JE, McCardle KF (1999) Options in the real world: Lessons learned in evaluating oil and gas investments. Oper. Res. 47(1):1–15.LinkGoogle Scholar
  • Thompson S, Waller M (1988) Determinants of liquidity costs in commodity futures markets. Rev. Futures Markets 7(1):110–126.Google Scholar
  • Thompson S, Eales J, Seibold D (1993) Comparison of liquidity costs between Kansas City and Chicago wheat futures contracts. J. Agricultural and Resource Econom. 18(2):185–197.Google Scholar
  • Tomlin B, Wang Y (2012) Operational strategies for managing supply chain disruption risk. Kouvelis P, Dong L, Boyabatli O, Li R, eds. Handbook of Integrated Risk Management in Global Supply Chains (John Wiley & Sons, Hoboken, NJ), 79–101.Google Scholar
  • Trigeorgis L (1996) Real Options: Managerial Flexibility and Strategy in Resource Allocation (MIT Press, Cambridge, MA).Google Scholar
  • Trolle AB, Schwartz ES (2009) Unspanned stochastic volatility and the pricing of commodity derivatives. Rev. Financial Stud. 22(11):4423–4461.CrossrefGoogle Scholar
  • U.S. Energy Information Administration (EIA) (2011) Natural gas—Underground natural gas storage capacity. Accessed January 22, 2011, http://www.eia.gov/dnav/ng/ng_stor_cap_dcu_nus_a.htm.Google Scholar
  • Williams J (1986) The Economic Function of Futures Markets (Cambridge University Press, Cambridge, UK).CrossrefGoogle Scholar
  • Williams J (1987) Futures markets: A consequence of risk aversion or transaction costs? J. Political Econom. 95(5):1000–1023.CrossrefGoogle 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.