An Optimal Rule for Switching over to Renewable fuels with Lower Price Volatility: A Case of Jump Diffusion Process
| dc.creator | Sardana, Kavita | |
| dc.creator | Bhattacharya, Subhra K. | |
| dc.date | 2017-04-01T15:02:01Z | |
| dc.date.accessioned | 2026-07-09T05:35:13Z | |
| dc.description | This study investigates the optimal switching boundary to a renewable fuel when oil prices exhibit continuous random fluctuations along with occasional discontinuous jumps. In this paper, oil prices are modeled to follow jump diffusion processes. A completeness result is derived. Given that the market is complete the value of a contingent claim is risk neutral expectation of the discounted pay off process. Using the contingent claim analysis of investment under uncertainty, the Hamilton-Jacobi-Bellman (HJB) equation is derived for finding value function and optimal switching boundary. We get a mixed differential-difference equation which would be solved using numerical methods. | |
| dc.identifier | doi:10.22004/ag.econ.103926 | |
| dc.identifier | https://ageconsearch.umn.edu/record/103926/files/Mixed%20Diffusion.pdf | |
| dc.identifier | http://ageconsearch.umn.edu/record/103926 | |
| dc.identifier.uri | http://hdl.handle.net/123456789/565696 | |
| dc.language | eng | |
| dc.publisher | ||
| dc.source | http://ageconsearch.umn.edu/record/103926 | |
| dc.title | An Optimal Rule for Switching over to Renewable fuels with Lower Price Volatility: A Case of Jump Diffusion Process | |
| dc.type | Text |