An economic view of carbon allowances market

Marius-Cristian Frunza () and Dominique Guegan ()
Additional contact information
Marius-Cristian Frunza: Centre d'Economie de la Sorbonne et Sagacarbon, https://centredeconomiesorbonne.cnrs.fr
Dominique Guegan: Centre d'Economie de la Sorbonne - Paris School of Economics, https://cv.archives-ouvertes.fr/dominique-guegan

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: The aim of this work is to bring an econometric approach upon the CO2 market. We identify the specificities of this market, and regarding the carbon as a commodity. We investigate the econometric particularities of CO2 prices behavior and their result of the calibration. We apprehend and explain the reasons of the non-Gaussian behavior of this market focusing mainly upon jump diffusion and generalized hyperbolic distributions. We test these results for the risk modeling of a structured product specific to the carbon market, the swap between two carbon instruments: The European Union Allowances and the Certiified Emission Reductions. We estimate the counterparty risk for this kind of transaction and evaluate the impact of different models upon the risk measure and the allocated capital

Keywords: Carbon; Normal Inverse Gaussian; CER; EUA; Swap (search for similar items in EconPapers)
Pages: 36 pages
Date: 2009-05
New Economics Papers: this item is included in nep-ene, nep-env and nep-res
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Citations: View citations in EconPapers (2)

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ftp://mse.univ-paris1.fr/pub/mse/CES2009/09038.pdf (application/pdf)

Related works:
Working Paper: An economic view of carbon allowances market (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:09038

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