Monday, 15:45 - 16:10 h, Room: MA 550


Georg Pflug
Stochastic bilevel programs with applications to electricity contracts

Coauthor: Raimund Kovacevic


We describe a typical contracting situation for flexible energy contracts as a bilevel stochastic program: The upper level sets the price and the lower level sets the execution pattern.
Bilevel programs are hard nonconvex global problems and typically no polynomial algorithms exist. We present however some solution algorithms, including stochastic quasigradient methods, penalty methods and line search methods.
We give illustrative examples for electricity swing option pricing, but remark that the very same type of problems appears in insurance pricing (adverse selection and moral hazard) as well as in terrorism modeling.


Talk 2 of the invited session Mon.3.MA 550
"Stochastic optimization for electricity production and trading" [...]
Cluster 18
"Optimization in energy systems" [...]


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