July 11th, 2007, 11:35 am
I' ve recently purchased this book and after a 2 year history of reading (and only sometimes understanding) quant literature this one comes along in a fresh way - also due to the stylish flow and the interesting interviews. The more technical topics are well selected. For me in particular the chapter 9 about the valuation of Power Derivatives was interesting. In this chapter Dr.Haug correctly states that most Power-Forwards are Swaps in disguise. This is not only true for the Nordpool energy exchange but also for other echanges, e.g. the EEX. Now I have a question concerning the calulation of a power swap value (equation 9.1): According to my knowledge most power-swaps are cleared via a variation marging scheme with no initial cash outlay. So I wonder if the valuation introduced by Dr.Haug is relevant for future type settlement as well. Any opinions are welcome.Cheers