Research

22 pages, 673 KiB

Open AccessArticle

Innovating and Pricing Carbon-Offset Options of Asian Styles on the Basis of Jump Diffusions and Fractal Brownian Motions

by Yue Qi and Yue Wang

Mathematics 2023, 11(16), 3614; https://0-doi-org.brum.beds.ac.uk/10.3390/math11163614 - 21 Aug 2023

Viewed by 810

Abstract

Due to CO

_{2}

emissions, humans are encountering grave environmental crises (e.g., rising sea levels and the grim future of submerged cities). Governments have begun to offset emissions by constructing emission-trading schemes (carbon-offset markets). Investors naturally crave carbon-offset options to effectively control risk. [...] Read more.

Due to CO

_{2}

emissions, humans are encountering grave environmental crises (e.g., rising sea levels and the grim future of submerged cities). Governments have begun to offset emissions by constructing emission-trading schemes (carbon-offset markets). Investors naturally crave carbon-offset options to effectively control risk. However, the research and practice for these options are relatively limited. This paper contributes to the literature in this area. Specifically, according to carbon-emission allowances’ empirical distributions, we implement fractal Brownian motions and jump diffusions instead of traditional geometric Brownian motions. We contribute to extending the theoretical model based on carbon-offset option-pricing methods. We innovate the carbon-offset options of Asian styles. We authenticate the options’ stochastic differential equations and analytically price the options in the form of theorems. We verify the parameter sensitivity of pricing formulas by illustrations. We also elucidate the practical implications of an emission-trading scheme. Full article

(This article belongs to the Special Issue Mathematical Methods in Energy Economy)

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20 pages, 714 KiB

Open AccessArticle

A Mutual Information-Based Network Autoregressive Model for Crude Oil Price Forecasting Using Open-High-Low-Close Prices

by Arash Sioofy Khoojine, Mahboubeh Shadabfar and Yousef Edrisi Tabriz

Mathematics 2022, 10(17), 3172; https://0-doi-org.brum.beds.ac.uk/10.3390/math10173172 - 03 Sep 2022

Cited by 5 | Viewed by 1232

Abstract

The global financial markets are greatly affected by crude oil price movements, indicating the necessity of forecasting their fluctuation and volatility. Crude oil prices, however, are a complex and fundamental macroeconomic variable to estimate due to their nonlinearity, nonstationary, and volatility. The state-of-the-art [...] Read more.

The global financial markets are greatly affected by crude oil price movements, indicating the necessity of forecasting their fluctuation and volatility. Crude oil prices, however, are a complex and fundamental macroeconomic variable to estimate due to their nonlinearity, nonstationary, and volatility. The state-of-the-art research in this field demonstrates that conventional methods are incapable of addressing the nonlinear trend of price changes. Additionally, many parameters are involved in this problem, which adds to the complexity of such a prediction. To overcome these obstacles, a Mutual Information-Based Network Autoregressive (MINAR) model is developed to forecast the West Texas Intermediate (WTI) close crude oil price. To this end, open, high, low, and close (OHLC) prices of crude oil are collected from 1 January 2020 to 20 July 2022. Afterwards, the Mutual Information-based distance is utilized to establish the network of OHLC prices. The MINAR model provides a basis to consider the joint effects of the OHLC network interactions, the autoregressive impact, and the independent noise and establishes an intelligent tool to estimate the future fluctuations in a complex, multivariate, and noisy environment. To measure the accuracy and performance of the model, three validation measures, namely, RMSE, MAPE, and UMBRAE, are applied. The results demonstrate that the proposed MINAR model outperforms the benchmark ARIMA model. Full article

(This article belongs to the Special Issue Mathematical Methods in Energy Economy)

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20 pages, 480 KiB

Open AccessArticle

Forecasting Crude Oil Future Volatilities with a Threshold Zero-Drift GARCH Model

by Tong Liu and Yanlin Shi

Mathematics 2022, 10(15), 2757; https://0-doi-org.brum.beds.ac.uk/10.3390/math10152757 - 03 Aug 2022

Cited by 1 | Viewed by 1175

Abstract

The recent price crash of the New York Mercantile Exchange (NYMEX) crude oil futures contract, which occurred on 20 April 2020, has caused history-writing movements of relative prices. For instance, the West Texas Intermediate (WTI) experienced a negative price. Explosive heteroskedasticity is also [...] Read more.

The recent price crash of the New York Mercantile Exchange (NYMEX) crude oil futures contract, which occurred on 20 April 2020, has caused history-writing movements of relative prices. For instance, the West Texas Intermediate (WTI) experienced a negative price. Explosive heteroskedasticity is also evidenced in associated products, such as the Intercontinental Exchange Brent (BRE) and Shanghai International Energy Exchange (INE) crude oil futures. Those movements indicate potential non-stationarity in the conditional volatility with an asymmetric influence of negative shocks. To incorporate those features, which cannot be accommodated by the existing generalized autoregressive conditional heteroskedasticity (GARCH) models, we propose a threshold zero-drift GARCH (TZD-GARCH) model. Our empirical studies of the daily INE returns from March 2018 to April 2020 demonstrate the usefulness of the TZD-GARCH model in understanding the empirical features and in precisely forecasting the volatility of INE. Robust checks based on BRE and WTI over various periods further lead to highly consistent results. Applications of news impact curves and Value-at-Risk (VaR) analyses indicate the usefulness of the proposed TZD-GARCH model in practice. Implications include more effectively hedging risks of crude oil futures for policymakers and market participants, as well as the potential market inefficiency of INE relative to WTI and BRE. Full article

(This article belongs to the Special Issue Mathematical Methods in Energy Economy)

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14 pages, 1804 KiB

Open AccessFeature PaperArticle

Macroeconomic Effects of Energy Price: New Insight from Korea?

by Yugang He and Moongi Lee

Mathematics 2022, 10(15), 2653; https://0-doi-org.brum.beds.ac.uk/10.3390/math10152653 - 28 Jul 2022

Cited by 4 | Viewed by 1566

Abstract

Under the double pressure of the Ukrainian–Russian war and the COVID-19 pandemic, the global energy crisis has also engulfed the Korean economy. Based on this context, this article examines the macroeconomic implications of energy prices, using Korea as an example. According to an [...] Read more.

Under the double pressure of the Ukrainian–Russian war and the COVID-19 pandemic, the global energy crisis has also engulfed the Korean economy. Based on this context, this article examines the macroeconomic implications of energy prices, using Korea as an example. According to an empirical study using the impulse response function, the results show that an energy price shock causes a decline in production, labor supply, capital stock, and energy consumption, as well as an increase in consumption, wages, the goods price level, inflation, and the deposit interest rate. Meanwhile, variance decomposition findings indicate that the energy price shock has a greater impact on the Korean macroeconomy than other shocks. In addition, the findings of three types of robustness tests validate the reliability and accuracy of the conclusions reached in this work. In conclusion, the information presented in this study may aid Korean policymakers in implementing appropriate countermeasures against macroeconomic volatility caused by the energy price shock. Full article

(This article belongs to the Special Issue Mathematical Methods in Energy Economy)

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11 pages, 297 KiB

Open AccessArticle

Forecasting Crude Oil Risk Using a Multivariate Multiscale Convolutional Neural Network Model

by Yingchao Zou and Kaijian He

Mathematics 2022, 10(14), 2413; https://0-doi-org.brum.beds.ac.uk/10.3390/math10142413 - 11 Jul 2022

Cited by 4 | Viewed by 1166

Abstract

In light of the increasing level of correlation and dependence between the crude oil markets and the external influencing factors in the related financial markets, we propose a new multivariate empirical decomposition convolutional neural network model to incorporate the external influence of financial [...] Read more.

In light of the increasing level of correlation and dependence between the crude oil markets and the external influencing factors in the related financial markets, we propose a new multivariate empirical decomposition convolutional neural network model to incorporate the external influence of financial markets such as stock market and exchange market in a multiscale setting into the modeling of crude oil market risk movement. We propose a multivariate empirical model decomposition to analyze the finer details of interdependence among risk movement of different markets across different time horizons or scales. We also introduce the convolutional neural network to construct a new nonlinear ensemble algorithm to reduce the estimation bias and improve the forecasting accuracy. We used the major crude oil price data, stock market index, and the euro/United States dollar exchange rate data to evaluate the performance of the multivariate empirical model decomposition convolutional neural network model. The combination of both the multivariate empirical model decomposition and the convolutional neural network model in this paper has produced the risk forecasts with significantly improved risk forecasting accuracy. Full article

(This article belongs to the Special Issue Mathematical Methods in Energy Economy)

14 pages, 3527 KiB

Open AccessArticle

A Novel Intelligent ANFIS for the Dynamic Model of Photovoltaic Systems

by Abdelhady Ramadan, Salah Kamel, I. Hamdan and Ahmed M. Agwa

Mathematics 2022, 10(8), 1286; https://0-doi-org.brum.beds.ac.uk/10.3390/math10081286 - 12 Apr 2022

Cited by 5 | Viewed by 2448

Abstract

Developing accurate models for photovoltaic (PV) systems has a significant impact on the evaluation of the accuracy and testing of PV systems. Artificial intelligence (AI) is the science of developing machine jobs to be more intelligent, similar to the human brain. Involving AI [...] Read more.

Developing accurate models for photovoltaic (PV) systems has a significant impact on the evaluation of the accuracy and testing of PV systems. Artificial intelligence (AI) is the science of developing machine jobs to be more intelligent, similar to the human brain. Involving AI techniques in modeling has a significant modification in the accuracy of the developed models. In this paper, a novel dynamic PV model based on AI is proposed. The proposed dynamic PV model was designed based on an adaptive neuro-fuzzy inference system (ANFIS). ANFIS is a combination of a neural network and a fuzzy system; thus, it has the advantages of both techniques. The design process is well discussed. Several types of membership functions, different numbers of training, and different numbers of membership functions are tested via MATLAB simulations until the AI requirements of the ANFIS model are satisfied. The obtained model is evaluated by comparing the model accuracy with the classical dynamic models proposed in the literature. The root mean square error (RMSE) of the real PV system output current is compared with the output current of the proposed PV model. The ANFIS model is trained based on input–output data captured from a real PV system under specified irradiance and temperature conditions. The proposed model is compared with classical dynamic PV models such as the integral-order model (IOM) and fractional-order model (FOM), which have been proposed in the literature. The use of ANFIS to model dynamic PV systems achieves an accurate dynamic PV model in comparison with the classical dynamic IOM and FOM. Full article

(This article belongs to the Special Issue Mathematical Methods in Energy Economy)

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17 pages, 1753 KiB

Open AccessArticle

Developing a Deep Neural Network with Fuzzy Wavelets and Integrating an Inline PSO to Predict Energy Consumption Patterns in Urban Buildings

by Mohsen Ahmadi, Mahsa Soofiabadi, Maryam Nikpour, Hossein Naderi, Lazim Abdullah and Behdad Arandian

Mathematics 2022, 10(8), 1270; https://0-doi-org.brum.beds.ac.uk/10.3390/math10081270 - 11 Apr 2022

Cited by 16 | Viewed by 2642

Abstract

Energy has been one of the most important topics of political and social discussion in recent decades. A significant proportion of the country’s revenues is derived from energy resources, making it one of the most important and strategic macro policy and sustainable development [...] Read more.

Energy has been one of the most important topics of political and social discussion in recent decades. A significant proportion of the country’s revenues is derived from energy resources, making it one of the most important and strategic macro policy and sustainable development areas. Energy demand modeling is one of the essential strategies for better managing the energy sector and developing appropriate policies to increase productivity. With the increasing global demand for energy, it is necessary to develop intelligent forecasting methods and algorithms. Different economic and non-economic indicators can be used to estimate the energy demand, including linear and non-linear statistical methods, mathematics, and simulation models. This non-linear relationship between these indicators and energy demand has led researchers to search for intelligent solutions, such as artificial neural networks for non-linear modeling and prediction. The purpose of this study was to use a deep neural network with fuzzy wavelets to predict energy demand in Iran. For the training of the presented components, a hybrid training method incorporating both an inline PSO and a gradient-based algorithm is presented. The provided technique predicts energy consumption in Tehran, Mashhad, Ahvaz, and Urmia from 2010 to 2021. This study shows that the presented method provides high-performance prediction at a lower level of complexity. Full article

(This article belongs to the Special Issue Mathematical Methods in Energy Economy)

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15 pages, 480 KiB

Open AccessArticle

Impact of Industry-Specific Risk Factors on Stock Returns of the Malaysian Oil and Gas Industry in a Structural Break Environment

by Mohammad Enamul Hoque and Soo-Wah Low

Mathematics 2022, 10(2), 199; https://0-doi-org.brum.beds.ac.uk/10.3390/math10020199 - 10 Jan 2022

Cited by 3 | Viewed by 1701

Abstract

This study examines the impact of industry-specific risk factors such as oil price, gas price, and exchange rate on stock returns of Malaysian oil and gas firms in a structural break environment by employing the break least square approach of Bai and Perron [...] Read more.

This study examines the impact of industry-specific risk factors such as oil price, gas price, and exchange rate on stock returns of Malaysian oil and gas firms in a structural break environment by employing the break least square approach of Bai and Perron (1998, 2003). Existing studies fall short of providing such empirical evidence. The results document evidence of structural breaks in the relationship between industry risk factors and the stock returns of the oil and gas industry. Industry-specific risk factors are shown to significantly affect the stock returns of oil and gas industry sub-sectors alongside market-based risk factors. The results reveal that the beta values of oil price, gas price, and exchange rate vary across sub-periods hence confirming that exposure of oil and gas stocks to industry risk factors varies over time and across sub-periods. The effects of oil, gas, and exchange rate risk factors also differ across the sub-industry, with impacts and directions largely dependent on the core business activities of the oil and gas sub-industries. The empirical results offer implications for asset managers and investors. Full article

(This article belongs to the Special Issue Mathematical Methods in Energy Economy)

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15 pages, 1861 KiB

Open AccessArticle

Energy Crisis in Pakistan and Economic Progress: Decoupling the Impact of Coal Energy Consumption in Power and Brick Kilns

by Abdul Rehman, Hengyun Ma, Magdalena Radulescu, Crenguta Ileana Sinisi and Zahid Yousaf

Mathematics 2021, 9(17), 2083; https://0-doi-org.brum.beds.ac.uk/10.3390/math9172083 - 28 Aug 2021

Cited by 19 | Viewed by 9216

Abstract

This study aims to examine the impact of coal energy consumption on the economic progress in Pakistan by using annual time series data during 1972–2019. Three-unit root tests were employed to rectify the variables’ stationarity. The quantile regression approach with the extension of [...] Read more.

This study aims to examine the impact of coal energy consumption on the economic progress in Pakistan by using annual time series data during 1972–2019. Three-unit root tests were employed to rectify the variables’ stationarity. The quantile regression approach with the extension of cointegration regression test was utilized to check the variables interaction with the economic progress. The outcomes of the quantile regression uncover that coal energy consumption in power sector and coal energy consumption in brick kilns have adverse influence to the economic progress, while total coal energy consumption has a productive association with the economic progress. Similarly, the findings of cointegration regression analysis uncover that via FMOLS (Fully Modified Least Squares) and DOLS (Dynamic Least Squares) that variables coal energy consumption in power sector and brick kilns have an adverse connection with the economic progress, while total coal energy consumption uncover a productive linkage to the economic progress in Pakistan. Pakistan is still facing a deep energy crisis because of the lack of energy production from cheap sources. New possible policies are required in this direction to improve the energy sector by paying more attention to the alternative energy sources to foster the economic progress. Full article

(This article belongs to the Special Issue Mathematical Methods in Energy Economy)

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