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The Spread Option Package

Espen Gaarder Haug
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The Spread Option Package can be used for valuation and sensitivity analysis of Spread Options. Spread options are popular in many markets, and especially in the energy markets. At New York Mercantile Exchange (NYMEX) spread options are traded on the spread/difference between heating oil and crude oil, as well as between gasoline and crude oil. These spreads are better known as crack spreads. And options on these spreads are known as crack spread options. Crack spread options are useful to refineries for hedging purposes.

With the deregulation of the electricity/power markets around the world, hedgers and risk takers are now also doing options on the price difference between oil and electricity. In the energy market such options are known as spark spread options.

*Business and Economics

Option pricing, spread options, crack spread options, spark spread options
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SpreadOption.m (11.5 KB) - Mathematica package
SpreadOption.nb (226.8 KB) - Mathematica notebook