Evaluating Energy Sector Investments: Calculating Volatility

A major task in assessing risks of investment projects is defining the approach to calculating the project’s volatility. Looking at assorted estimation techniques, this paper calculates their volatilities. The techniques originate from authors in the area and involve project-specific variables of un...

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Bibliographic Details
Published in:Mathematical Problems in Engineering 2013-01, Vol.2013 (2013), p.376-384-036
Main Authors: Albuquerque, Valério Oscar, de Pinho, Alexandre Ferreira, Montevechi, José Arnaldo Barra, Brandão, Marina Carvalho, Pamplona, Edson de Oliveira, Rotela Junior, Paulo
Format: Article
Language:English
Subjects:
Capital expenditures
Decision making
Discounted cash flow
Economic models
Economists
Electric power distribution
Electricity
Energy industry
Engineering
Investments
Mathematical analysis
Mathematical models
Operations management
Probability
Real options analysis
Risk assessment
Securities prices
Tasks
Uncertainty
Variables
Volatility
Citations: Items that this one cites
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Summary:A major task in assessing risks of investment projects is defining the approach to calculating the project’s volatility. Looking at assorted estimation techniques, this paper calculates their volatilities. The techniques originate from authors in the area and involve project-specific variables of uncertainty. These techniques are applied to a case of electricity distribution through real options. Results are then compared. The difference between the calculated volatilities was low, leaving, in the case of the project evaluated here, the decision unchanged. The paper’s contribution consists of providing a detailed presentation of calculating volatility by the methods cited and by comparing the results obtained by its application.
ISSN:1024-123X
1563-5147
DOI:10.1155/2013/128309