The paper is dedicated to modeling electricity spot prices and pricing forward contracts on energy markets. The underlying dynamics of electricity spot prices is governed by a stochastic mean reverting diffusion with jumps having mixed-exponential distribution. Application of financial mathematics and stochastic methods enabled the derivation of the analytical formula for the forward contract's price in a crisp case. Since the model parameters' incertitude is considered, their fuzzy counterparts are introduced. Utilization of fuzzy arithmetic enabled deriving an analytical expression for the futures price and proposing a modified method for decision-making under uncertainty. Finally, numerical examples are analyzed to illustrate our pricing approach and the proposed financial decision-making method.
Keywords: decision making; derivatives pricing; energy markets; fuzzy sets; jump-diffusion; stochastic processes.