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

Fuzzy Optimization and Decision Making (2022)Cite this article

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.

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Authors and Affiliations

  1. Department of Applied Mathematics, Faculty of Mathematical Sciences, University of Guilan, Rasht, 41938-1914, Iran

    Farshid Mehrdoust & Idin Noorani

  2. Department of Mathematics, Ryerson University, 350 Victoria Street, Toronto, ON, Canada

    Wei Xu

Authors
  1. Farshid Mehrdoust
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  2. Idin Noorani
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  3. Wei Xu
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Correspondence to Farshid Mehrdoust.

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Appendix

Appendix

The data set for the NYMEX gas and the New England electricity futures prices are collected from EIA (Energy Information Administration) on a trading day from January 01, 2021 to June 30, 2021. The EIA is one of the reliable sources of energy data that many researchers rely on to collect their data on energy research (Tables 3 and 4).

Table 3 NYMEX gas futures prices from January 01, 2021 to June 30, 2021
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Table 4 New England electricity futures prices from January 01, 2021 to June 30, 2021
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Mehrdoust, F., Noorani, I. & Xu, W. Uncertain energy model for electricity and gas futures with application in spark-spread option price. Fuzzy Optim Decis Making (2022). https://doi.org/10.1007/s10700-022-09386-z

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  • DOI: https://doi.org/10.1007/s10700-022-09386-z

Keywords

  • Energy markets
  • Futures
  • Uncertainty theory
  • Parameter estimation
  • Spark-spread option