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From a modelling point of view, the portfolio management of ToP contracts with swing-like options such as Make-Up and others, is a complex, large scale, optimization problem with integer variables and a lot of source of uncertainty that cannot be neglected in modern models. The uncertainty, in turn, are of different types and produce either volume as well as price risks. For instance, price risk can be taken into account if the buyer consider alternatives of buying spot volumes on the market in future times.

Contributor:

Dr Fabrizio Lacalandra, QuanTek