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Uncertain energy model for electricity and gas futures with application in spark-spread option price

Author

Listed:
  • Farshid Mehrdoust

    (University of Guilan)

  • Idin Noorani

    (University of Guilan)

  • Wei Xu

    (Ryerson University)

Abstract

In this paper, we propose an uncertain energy model with a time-varying volatility factor to describe the electricity and gas futures price dynamics. The corresponding spark-spread option pricing problem is also discussed. Numerical experiments show the effectiveness of proposed pricing method. Compared with the existing stochastic models, our uncertain energy model has a better performance to catch the price evolution of both gas and electricity futures.

Suggested Citation

  • Farshid Mehrdoust & Idin Noorani & Wei Xu, 2023. "Uncertain energy model for electricity and gas futures with application in spark-spread option price," Fuzzy Optimization and Decision Making, Springer, vol. 22(1), pages 123-148, March.
    • Handle: RePEc:spr:fuzodm:v:22:y:2023:i:1:d:10.1007_s10700-022-09386-z
    DOI: 10.1007/s10700-022-09386-z
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    References listed on IDEAS

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    1. Lifen Jia & Wei Chen, 2021. "Uncertain SEIAR model for COVID-19 cases in China," Fuzzy Optimization and Decision Making, Springer, vol. 20(2), pages 243-259, June.
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    6. Kai Yao & Baoding Liu, 2020. "Parameter estimation in uncertain differential equations," Fuzzy Optimization and Decision Making, Springer, vol. 19(1), pages 1-12, March.
    7. Liu, Z., 2021. "Generalized moment estimation for uncertain differential equations," Applied Mathematics and Computation, Elsevier, vol. 392(C).
    8. Wimschulte, Jens, 2010. "The futures and forward price differential in the Nordic electricity market," Energy Policy, Elsevier, vol. 38(8), pages 4731-4733, August.
    9. Yang, Xiangfeng & Liu, Yuhan & Park, Gyei-Kark, 2020. "Parameter estimation of uncertain differential equation with application to financial market," Chaos, Solitons & Fractals, Elsevier, vol. 139(C).
    10. Tang, Han & Yang, Xiangfeng, 2021. "Uncertain chemical reaction equation," Applied Mathematics and Computation, Elsevier, vol. 411(C).
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    Cited by:

    1. Yang Liu & Zhongfeng Qin & Xiang Li, 2024. "Are the queueing systems in practice random or uncertain? Evidence from online car-hailing data in Beijing," Fuzzy Optimization and Decision Making, Springer, vol. 23(4), pages 497-511, December.

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