Risk Assessment for a Structured Product Specific to the CO2 Emission Permits Market

Marius-Cristian Frunza () and Dominique Guegan ()
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Marius-Cristian Frunza: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, Sagacarbon - Sagacarbon SA
Dominique Guegan: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: The aim of this work is to use a new modelling technique for CO2 emission prices, in order to estimate the risk associated with a related, structured product. After a short discussion of the specificities of this market, we investigate several modelling methods for CO2 emission prices. We use these results for risk modeling of the swap between two CO2 related instruments : the European Union Allowances and the Certified Emission Reductions. We estimate the counterparty risk for this kind of transaction and evaluate the impact of different models on the risk measure and the allocated capital.

Keywords: Carbon; Carbone; Generalized Hyperbolic Distribution; CER; EUA; Swap; Value at Risk (search for similar items in EconPapers)
Date: 2010-06
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00504209v1
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Published in 2010

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Working Paper: Risk assessment for a Structured Product Specific to the CO2 Emission Permits Market (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:halshs-00504209

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