Robust valuation and hedging of tolling agreements and physical assets

Flexible, martingale duality-based method provides reliable valuation

Natural gas storage - tolling agreements and physical assets
This paper considers a simplified version of a natural gas power plant

The problem of valuation and risk management of tolling agreements or complicated physical contracts/assets within a trading environment has received a substantial amount of interest in both the academic and practitioner literature (see Eydeland & Wolyniec (2014)).

The significant complexity of the associated payoff function with the many path-wise dependencies and non-convexities (such as lump costs) have led to a variety of solutions, approaches and heuristics. There is clearly a need to cut t

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