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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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