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Centre of Financial Mathematics Seminar Series
September 21, 2017 @ 1:30 pm - 2:30 pm
Dr. Boda Kang (University of York, UK)
The Efficient Evaluation of Gas Sales Agreements with Indexation Using GPU
A typical gas sales agreement (GSA), also called a gas swing contract, is an agreement between a supplier and a purchaser for the delivery of variable daily quantities of gas, between specified minimum and maximum daily limits, over a certain number of years at a specified set of contract prices. What makes them difficult to value is that, at each gas day, the strike price of the contract is based on the indexation principle under which the strike price is the averaged spot prices of another energy product (e.g. crude oil) over the previous month. Another constraint is that in each gas year there is a minimum volume of gas (termed take-or-pay or minimum bill) for which the buyer will be charged at the end of the year (or penalty date), regardless of the actual quantity of gas taken. We propose a lattice-based framework for pricing such swing contracts. With the help of the GPU programming (CUDA), we are able to efficiently evaluate the prices of the swing contracts, find optimal daily decisions. We also show how the indexation principle will affect the decisions.
Please let Chi Chung Siu know if you want to join the speaker for lunch at Expresso Warriors before the seminar at 12pm.