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

Author

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  • 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.
    2. Yang Liu & Baoding Liu, 2022. "Residual analysis and parameter estimation of uncertain differential equations," Fuzzy Optimization and Decision Making, Springer, vol. 21(4), pages 513-530, December.
    3. Liu, Z., 2021. "Generalized moment estimation for uncertain differential equations," Applied Mathematics and Computation, Elsevier, vol. 392(C).
    4. Tang, Han & Yang, Xiangfeng, 2021. "Uncertain chemical reaction equation," Applied Mathematics and Computation, Elsevier, vol. 411(C).
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    7. Rauch, Johannes & Krayzler, Mikhail & Brunner, Bernhard & Zagst, Rudi, 2013. "Pricing of derivatives on commodity indices," International Review of Financial Analysis, Elsevier, vol. 29(C), pages 143-151.
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    Cited by:

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    2. 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.
    3. Jin Peng & Bo Zhang & Lin Chen & Hui Li, 2024. "A survey on uncertain graph and uncertain network optimization," Fuzzy Optimization and Decision Making, Springer, vol. 23(1), pages 129-153, March.
    4. Hong Huang & Meihua Jiang & Yufu Ning & Shuai Wang, 2025. "A Structural Credit Risk Model with Jumps Based on Uncertainty Theory," Mathematics, MDPI, vol. 13(6), pages 1-19, March.
    5. Xin, Yue & Zhang, Yi & Noorani, Idin & Mehrdoust, Farshid & Gao, Jinwu, 2025. "Estimation of parameters and valuation of options written on multiple assets described by uncertain fractional differential equations," Applied Mathematics and Computation, Elsevier, vol. 487(C).

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