Optimal investment portfolio in renewable energy: The Spanish case

Renewable generation sources still have not achieved economic validity in many countries including Korea, and require subsidies to support the transition to a low-carbon economy. An initial Feed-In Tariff (FIT) was adopted to support the deployment of renewable energy in Korea until 2011 and then was switched to the Renewable Portfolio Standard (RPS) to implement more market-oriented mechanisms. However, high volatilities in electricity prices and subsidies under the RPS scheme have weakened investment incentives. In this study we estimate how the multiple price volatilities under the RPS scheme affect the optimal investment decisions of energy storage projects, whose importance is increasing rapidly because they can mitigate the variability and uncertainty of solar and wind generation in the power system. We applied mathematical analysis based on real-option methods to estimate the optimal trigger price for investment in energy-storage projects with and without multiple price volatilities. We found that the optimal trigger price of subsidy called the Renewable Energy Certificate (REC) under multiple price volatilities is 10.5% higher than that under no price volatilities. If the volatility of the REC price gets doubled, the project requires a 26.6% higher optimal investment price to justify the investment against the increased risk. In the end, we propose an auction scheme that has the advantage of both RPS and FIT in order to minimize the financial burden of the subsidy program by eliminating subsidy volatility and find the minimum willingness-to-accept price for investors.

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MATHEMATICAL ALGORITHMS OF GAME THEORY AS AN APPLIED TOOL FOR MAKING EFFECTIVE FINANCIAL AND ECONOMIC DECISIONS

SOFT MEASUREMENTS AND COMPUTING ◽

10.36871/2618-9976.2020.11.003 ◽

2020 ◽

Vol 1 (11) ◽

pp. 33-47

Author(s):

Leonid S. Zvyagin ◽

Keyword(s):

Game Theory ◽

Price Competition ◽

Optimal Investment ◽

Point Of View ◽

Investment Portfolio ◽

Economic Decisions ◽

Economic Sphere ◽

Mathematical Algorithms ◽

Business Game ◽

The Relationship

Recently, the methods of gametheoretic modeling are increasingly used in the financial sphere. In particular, the formation of an optimal investment portfolio is considered and analyzed from the point of view of game theory as a type of cooperative game. In business, game theory is widely used to model the behavior between competitors. Economists often use game theory to understand the behavior of oligopolies, trying to calculate when firms collude. The relevance of game theory methods for the financial and economic sphere is due to their universality, as well as mathematical validity. This article examines how using the concepts contained in game theory, it is possible not only to build real scenarios for such situations as price competition, production and output, the relationship between buyer and seller, but also to predict their results. The purpose of this article is to study the basic concepts of game theory, as well as to consider practical approaches to solving specific situations that are reflected in the financial and economic sphere

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An Optimal Investment Portfolio Constructed with Fractal Analysis and Long Memory Models

10.1007/978-3-030-89477-1_99 ◽

2021 ◽

pp. 1116-1131

Author(s):

Robert Garafutdinov

Keyword(s):

Fractal Analysis ◽

Long Memory ◽

Optimal Investment ◽

Memory Models ◽

Investment Portfolio

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Form the Optimal Investment Portfolio Applied Study in the Jordanian Banking Sector (2013-2017)

International Business Research ◽

10.5539/ibr.v13n3p79 ◽

2020 ◽

Vol 13 (3) ◽

pp. 79

Author(s):

Suleiman Daood Al-Oshaibat ◽

Daood Al-Oshaibat

Keyword(s):

Commercial Banks ◽

Banking Sector ◽

Stock Exchange ◽

Optimal Investment ◽

Effective Rate ◽

Rate Of Return ◽

Investment Portfolio ◽

Applied Study ◽

Securities Analysts ◽

Amman Stock Exchange

The study aimed to form the optimal investment portfolio in the Jordanian banking sector. The research covered a period (2013-2017) and the sample of the study was selected from its community of Jordanian banks listed on the Amman Stock Exchange, consisting of (15) working banks for which the necessary data are available to study. The importance of the research lies in the formation of a thought and methodology that can be applied and utilized by investors and securities analysts in the management of their investment portfolio. The study shows that the effective rate of return is higher than the required rate of return in the Jordanian commercial banks. This indicates that the commercial banks have succeeded in their estimates of the required or actual rate of return for the optimal investment portfolio banks. the correlation matrix between returns on each bank in the investment portfolio is mostly low, which confirms that the investment portfolio of Jordanian banks is efficient, as Markowitz stressed on his focus on the correlation coefficient between returns and its impact on the return and risk of the optimal investment portfolio that achieve the highest return at a certain level of risk.

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Identification and Prioritization of Risk and Its Effect of the Renewable Energy Life Cycle Based on Performance and Risk Indicators

International Journal of Accounting and Finance Studies ◽

10.22158/ijafs.v2n2p61 ◽

2019 ◽

Vol 2 (2) ◽

pp. p61

Author(s):

Hassan Farsijani ◽

Maryam Moradi

Keyword(s):

Risk Factors ◽

Renewable Energy ◽

Life Cycle ◽

Electricity Market ◽

Risk Control ◽

Optimal Investment ◽

Energy System ◽

Risk Indicators ◽

High Risk Factors ◽

Investment Portfolios

Risk management consists of two aspects of risk control and risk assessment in the electricity market. So, risk control should cover the risk and work out of the way of optimal investment portfolios. Thus, the aim of this research is producing solar electricity life cycle profitability. First to identify existing risks in the production of electricity using Delphi technique between 300 experts in 15 Powerhouse. Then, the grey ANP model was the adoption of the New Energy Organization of Iran. The number of risk factors were collected by subject literature in renewable energy in Iran that have analyzed and selected the high-risk factors by ANP GREY method. Finally, to examine the life cycle of solar power, the authors analyzed financial indicators and the life cycle’s factors which relates to performance and risk variables, then, the Regression model used in three stages of life cycle. Finally, the result provides incentives for the energy system to support production renewable electricity and aid to increase the profitability of the renewable energy cycle.

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Least Squares Monte Carlo Simulation-Based Decision-Making Method for Photovoltaic Investment in Korea

Sustainability ◽

10.3390/su131910613 ◽

2021 ◽

Vol 13 (19) ◽

pp. 10613

Author(s):

Jungmin An ◽

Dong-Kwan Kim ◽

Jinyeong Lee ◽

Sung-Kwan Joo

Keyword(s):

Decision Making ◽

Monte Carlo ◽

Renewable Energy ◽

Least Squares ◽

Sustainable Energy ◽

Clean Energy ◽

Optimal Investment ◽

Investment Timing ◽

Least Squares Monte Carlo ◽

The Impact

Solar power for clean energy is an important asset that will drive the future of sustainable energy generation. As interest in sustainable energy increases with Korea’s renewable energy expansion plan, a strategy for photovoltaic investment (PV) is important from an investor’s point of view. Previous research primarily focused on assessing and analyzing the impact of the volatility but paid little attention to the modeling decision-making project to obtain the optimal investment timing. This paper utilizes a Least Squares Monte Carlo-based method for determining the timing of PV plant investment. The proposed PV decision-making method is designed to simulate the total PV generation revenue period with all uncertain PV price factors handled before determining the optimal investment time. The numerical studies with nine different scenarios considering system marginal price (SMP) and renewable energy certificate (REC) spot market price in Korea demonstrated how to determine the optimal investment time for different PV capacities. Therefore, the proposed method can be used as a decision-making tool to provide PV investors with information on the best time to invest in the renewable energy market.

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Constructing an optimal investment portfolio for the Bank of Lithuania

Ekonomika ◽

10.15388/ekon.2016.1.9909 ◽

2016 ◽

Vol 95 (1) ◽

pp. 112-133

Author(s):

Birutė Galinienė ◽

Justina Stravinskytė

Keyword(s):

Management Strategies ◽

Optimal Investment ◽

Investment Strategy ◽

Financial Assets ◽

Currency Risk ◽

Investment Portfolio ◽

Risky Assets ◽

Course Of Action ◽

Total State ◽

Assets Management

The main goal of this article is to illustrate the strategy, devised to improve the effectiveness of utilizing the financial assets, or in this case, the official international reserves, belonging to the Bank of Lithuania. In Lithuania, the value of financial assets as a percentage of total state assets has doubled in the span of 10 years. Moreover, a strong correlation between the real GDP growth and the Bank of Lithuania’s financial assets/profitability implies that the effectiveness of financial assets management has a nationally wide impact. Unfortunately, the Bank’s profit/invested value indicator has reached a record low in 2012–2013, which resulted in the whole bank’s profit being absorbed into the state’s budget (as opposed to 70 % of it). Such signs meant that the previous investment strategy has become ineffective and needed changes.To highlight the necessary changes, the authors conduct a practical research and construct the optimal investment portfolio, according to the goals and variables given by the guidelines, proposed by Bank of Lithuania. The size of the portfolio is 4,14 bn euros, and the maximum loss per year (VaR) allowed is -100 M euro/year, as stated by the Bank of Lithuania’s risk budget limit. The authors also focus on the issue of increased currency risk after investing in volatile share indices and whether hedging against it with Forex spot transactions is beneficial.The result of the research is an optimal portfolio, consisting of 9,85 percent of risk-free assets and 90,15 percent of risky assets. Hedging against currency risk in this case is an ultimately beneficial course of action, yielding an increase of annual returns by 0,3 percent, which translates to +12,3 mln euros. Finally, the portfolio is flexible and simple to reshape into a less risky variant, if the institution predicts the dangers of possible future economic downfalls.This research was further used in a broader paper whose goal was to analyse and assess the effectiveness of currently employed assets’ management strategies in Lithuania.

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