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Miguel Jiménez-Gómez
Instituto Tecnológico Metropolitano – ITM

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Currency hedging strategy using barrier options in the colombian market Mariana Arango-Franco; Miguel Jiménez-Gómez; Natalia Acevedo-Prins
Indonesian Journal of Electrical Engineering and Computer Science Vol 20, No 3: December 2020
Publisher : Institute of Advanced Engineering and Science

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.11591/ijeecs.v20.i3.pp1634-1641

Abstract

One of the main problems for the growth of the Colombian market is the short variety of investment instruments found in the local market. In this way, an exchange rate hedging strategy is proposed using exotic options, specifically, barrier-type options. These types of options are not offered in the Colombian market. Monte Carlo simulation is used to determine the effect that the hedging strategy has on currency risk. From the results, it is concluded that the exchange risk is decreased with the hedging strategy because the 5th and 95th percentiles are lower than in the scenario without hedging. Finally, the code that was used to model the barrier options is explained.
Evaluation of wind park tax incentives in Colombia by means of real options Miguel Jiménez-Gomez; Natalia Acevedo-Prins
Indonesian Journal of Electrical Engineering and Computer Science Vol 19, No 1: July 2020
Publisher : Institute of Advanced Engineering and Science

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.11591/ijeecs.v19.i1.pp459-465

Abstract

The objective of this study is to assess tax incentives in Colombia to foster investment in wind parks. Fiscal incentives seek to diversify energy consumption with non-conventional renewable energy sources, since power is mostly generated by hydraulic force and since its price is impacted during dry seasons. The price of energy is modeled according to a regression toward the mean. This stochastic process was chosen because during droughts in Colombia there are price increases, which then return to their average value. This is an upward and downward spike behavior, as well as a regression toward the mean. Given price uncertainty and its impact on cashflow, wind parks were valued with real options to flatten the reversal for five years. The real option of flattening as an American call option was considered. Results show that, according to traditional valuation methods, wind parks in Colombia are not profitable even with tax incentives. However, according to the real options method, tax incentives do make these projects economically viable.
Co-Authors Mariana Arango-Franco Natalia Acevedo-Prins Natalia Acevedo-Prins