1. Deep recurrent Q-network algorithm for carbon emission allowance trading strategy.
- Author
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Wu C, Bi W, and Liu H
- Subjects
- Global Warming prevention & control, Carbon, Algorithms
- Abstract
Against the backdrop of global warming, the carbon trading market is considered as an effective means of emission reduction. With more and more companies and individuals participating in carbon markets for trading, it is of great theoretical and practical significance to help them automatically identify carbon trading investment opportunities and achieve intelligent carbon trading decisions. Based on the characteristics of the carbon trading market, we propose a novel deep reinforcement learning (DRL) trading strategy - Deep Recurrent Q-Network (DRQN). The experimental results show that the carbon allowance trading model based on the DRQN algorithm can provide optimal trading strategies and adapt to market changes. Specifically, the annualized returns for the DRQN algorithm strategy in the Guangdong (GD) and Hubei (HB) carbon markets are 15.43% and 34.75%, respectively, significantly outperforming other strategies. To better meet the needs of the actual implementation scenarios of the model, we analyze the impacts of discount factors and trading costs. The research results indicate that discount factors can provide participants with clearer expectations. In both carbon markets (GD and HB), there exists an optimal discount factor value of 0.4, as both excessively small or large values can have adverse effects on trading. Simultaneously, the government can ensure the fairness of carbon trading by regulating the costs of carbon trading to limit the speculative behavior of participants., Competing Interests: Declaration of competing interest The authors declare the following financial interests/personal relationships which may be considered as potential competing interests:Haiying Liu reports financial support was provided by National Social Science Fund of China. If there are other authors, they declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper., (Copyright © 2024 Elsevier Ltd. All rights reserved.)
- Published
- 2024
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