USING THE BINOMIAL MODEL IN CALCULATING OPTIMAL SUBSIDIES FOR CHINESE INVESTMENTS IN RENEWABLE ENERGY SOURCES

UDC 330.322; 620.91
DOI: 10.36871/2618-9976.2022.08.003

Authors

Daniil A. Kramer
Master Student, Financial University under the Government of Russia, Moscow, Russia
Andrey V. Tregub
Candidate of Physical and Mathematical Sciences, Associate Professor, Financial University under the Government of Russia, Moscow, Russia

Abstract

This article focuses on the use of a binomial model to calculate the required subsidy, which would encourage investors to optimally immediately use the Americanstyle option laid down at the launch stage of Chinese renewable energy investment projects. In addition, this article also aims to contrast the binomial model with the more timeconsuming Monte Carlo simulation previously used to estimate the appropriate subsidy. Using the same data, but using a different method, and reducing the number of uncertain factors to one, it is assumed that these two methods have similar results, but the binomial method requires significantly less calculations and is more understandable.

Keywords

Energy sources, Binomial model, Options valuation methods