Valuing real options requires the use of sophisticated quantitative analytical methods. The rewards from understanding the real options embedded in energy assets are immense. The price volatility in the new market environment has created unprecedented earnings for energy traders. Traditional utilities are taking advantage of the significant earnings opportunities by offering stock in their energy trading divisions. In April 2001, Southern distributed the remainder of Mirant stock to shareholders and today the market capitalization of Mirant is almost equal to that of the former parent company.
Quant shops are multidisciplinary and multicultural.
Backgrounds of employees include advanced degrees in physics, applied mathematics, economics and operations research. Local educational institutions are responding to the need for professionals trained in modern energy finance. For instance, the University of Texas established the Center for Energy Finance Education and Research in the Department of Finance at the UT College and Graduate School of Business. Other top institutions that are feeding graduates into energy asset valuation research include the University of Chicago, Carnegie Mellon University and the University of Virginia. Innovative finance now is one of the largest drivers behind effective and profitable energy asset optimization.