eng Science and Education Publishing American Journal of Modeling and Optimization 2333-1267 2015-02-09 3 1 7 21 10.12691/ajmo-3-1-2 AJMO2015312 article Simulation for Pricing Electricity Consumptions in Nigeria and Hedging of Generation and Transmission Costs Oyediran Benjamin Oyelami boyelami2000@yahoo.com 1 2 Adedamola Adewumi Adedoyin 3 National Mathematical Centre Abuja, Nigeria Department of Mathematics University of Abuja, Nigeria In this paper, simulations are carried to obtain fair electricity tariff for domestic consumption in Nigeria using the Ornstein-Uhlenbeck model and Monte Carlo method. The fair price also determined for transmission companies to buy electricity from the generating companies through European option derivative contracts. The fair price for a call option using Monte Carlo simulation is found to be 0.310 Naira and put price written by transmission companies to the distribution companies is found to be 0.307 Naira and finally, price sensitivity analyses for companies' portfolio are made also. http://pubs.sciepub.com/ajmo/3/1/2/ajmo-3-1-2.pdf model electricity tariff European option Monte Carlo simulation price sensitivity analyses