Article citationsMore >>

Montero, Jose M. Maria C. Garcia –Centeno, Gema Fernandez-Aviles (2011) Modelling the Volatility of Spanish Wholesale Electricity Spot Market: Asymmetric Garch models Vs Threshold ARSV model, Estudios de Economia Aplicada, vol. 29, no 2, pp 597-616 Association International de Economia Aplicada Espana.

has been cited by the following article:

Article

Simulation for Pricing Electricity Consumptions in Nigeria and Hedging of Generation and Transmission Costs

1National Mathematical Centre Abuja, Nigeria

2Department of Mathematics Plateau State University, Bokkos, Nigeria

3Department of Mathematics University of Abuja, Nigeria


American Journal of Modeling and Optimization. 2015, Vol. 3 No. 1, 7-21
DOI: 10.12691/ajmo-3-1-2
Copyright © 2015 Science and Education Publishing

Cite this paper:
Oyediran Benjamin Oyelami, Adedamola Adewumi Adedoyin. Simulation for Pricing Electricity Consumptions in Nigeria and Hedging of Generation and Transmission Costs. American Journal of Modeling and Optimization. 2015; 3(1):7-21. doi: 10.12691/ajmo-3-1-2.

Correspondence to: Oyediran  Benjamin Oyelami, National Mathematical Centre Abuja, Nigeria. Email: boyelami2000@yahoo.com

Abstract

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.

Keywords