@article{detemple_kitapbayev_2022, title={Optimal technology adoption for power generation}, volume={111}, ISSN={["1873-6181"]}, DOI={10.1016/j.eneco.2022.106085}, abstractNote={We examine the decision problem of a power producer contemplating an upgrade of its current generation capacity based on a fossil fuel technology (gas plant), when price processes have affine drift and differentiable volatility functions. The operator can choose the best of four mutually exclusive alternatives, continue operating the current technology, replace it by a more efficient fossil fuel technology (gas plant), replace it by a renewable technology (wind plant), and divest (liquidate). There are four corresponding decision regions with three boundaries. Optimal boundaries of regions are characterized through a trivariate system of coupled Fredholm equations and valuation formulas derived. Investing in a more efficient gas plant is optimal if the gas price falls below some threshold and the electricity price exceeds an associated (gas) boundary. For some parameters, the gas price must also exceed a lower threshold. Investing in a wind plant is optimal if the gas price becomes sufficiently high and the electricity price exceeds an associated (wind) boundary. Liquidation is optimal if the electricity price falls below a (liquidation) boundary. The continuation region lies in between these boundaries. The possibility of investing in wind displaces new gas investment and postpones liquidation of the existing gas plant. We study the value of the firm and the Green Energy premium, and assess the impact of model parameters. • Four alternatives: Continue as is, switch to efficient gas technology, switch to wind, or liquidate. • Electricity and gas price processes with affine drifts and differentiable volatility functions. • Waiting is always optimal when two of the three alternatives have equal value, even if infinite. • The value of Green Energy (wind premium) does not necessarily increase when the gas price increases.}, journal={ENERGY ECONOMICS}, author={Detemple, Jerome and Kitapbayev, Yerkin}, year={2022}, month={Jul} }
 @article{kitapbayev_2021, title={CLOSED FORM OPTIMAL EXERCISE BOUNDARY OF THE AMERICAN PUT OPTION}, volume={24}, ISSN={["1793-6322"]}, DOI={10.1142/S0219024921500047}, abstractNote={ We present three models of stock price with time-dependent interest rate, dividend yield, and volatility, respectively, that allow for explicit forms of the optimal exercise boundary of the finite maturity American put option. The optimal exercise boundary satisfies the nonlinear integral equation of Volterra type. We choose time-dependent parameters of the model so that the integral equation for the exercise boundary can be solved in the closed form. We also define the contracts of put type with time-dependent strike price that support the explicit optimal exercise boundary. }, number={1}, journal={INTERNATIONAL JOURNAL OF THEORETICAL AND APPLIED FINANCE}, author={Kitapbayev, Yerkin}, year={2021}, month={Feb} }
 @article{detemple_kitapbayev_2021, title={Callable barrier reverse convertible securities}, ISSN={["1469-7696"]}, DOI={10.1080/14697688.2021.1912380}, abstractNote={We study the valuation of callable barrier reverse convertible contracts written on one or two underlying asset prices. We assume the issuer of the contract can call early redemption at any time during a pre-specified time interval. We identify the optimal redemption policy and show, in the single underlying asset case, it is characterized by a time-dependent boundary. The boundary satisfies a nonlinear integral equation of the Volterra type. When there are two underlying assets, the boundary is a surface depending on one price in addition to time. Valuation formulas and associated integral equations are derived. Numerical experiments are performed.}, journal={QUANTITATIVE FINANCE}, author={Detemple, Jerome and Kitapbayev, Yerkin}, year={2021}, month={Jun} }
 @article{detemple_kitapbayev_2021, title={Optimal Power Investment and Pandemics: A Micro-Economic Analysis}, volume={14}, ISSN={["1996-1073"]}, DOI={10.3390/en14040814}, abstractNote={This paper derives the optimal investment policy of an electricity producer during a pandemic. We consider three problems: (1) investing in a gas-fired plant, (2) investing in a wind plant, and (3) investing in the best of a gas plant and a wind plant. Optimal investment boundaries are characterized and valuation formulas derived. For single technology projects, a pandemic postpones wind investment, but can accelerate gas investment when the relative price of gas decreases. For choices between the two technologies, a substitution effect can reinforce the single technology effects, accelerating gas investment under certain conditions. The paper examines the impact of pandemic parameters, economic parameters and policy parameters on the investment boundaries, the values of projects and the premium for green energy.}, number={4}, journal={ENERGIES}, author={Detemple, Jerome and Kitapbayev, Yerkin}, year={2021}, month={Feb} }
 @article{detemple_kitapbayev_2020, title={The value of green energy under regulation uncertainty}, volume={89}, ISSN={["1873-6181"]}, DOI={10.1016/j.eneco.2020.104807}, abstractNote={We examine investments in power generation projects under policy uncertainty, when the investor has the choice between two alternative technologies, a gas-fired plant and a wind plant. Increased likelihood of subsidy withdrawal reduces the payoff from and postpones investments in the wind technology. Simultaneously, it accelerates investments in gas, thereby eliminating or further postponing investments in wind capacity. We show that this substitution phenomenon can be of first order importance: it can have a significant impact on the timing of investment, the wind premium, and the probability of investing in the wind technology. Our results provide new insights about the scope and impact of green energy regulation.}, journal={ENERGY ECONOMICS}, author={Detemple, Jerome and Kitapbayev, Yerkin}, year={2020}, month={Jun} }