Correlations and Volatility Spillovers between the Carbon Trading Price and Bunker Index for the Maritime Industry

Ming-Tao Chou () and Cherie Lu ()
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Ming-Tao Chou: Department of Aviation & Maritime Management, Chang Jung Christian University, 1 Changda Road, Gueiren District, Tainan 71101, TAIWAN
Cherie Lu: Department of Aviation & Maritime Management, Chang Jung Christian University, 1 Changda Road, Gueiren District, Tainan 71101, TAIWAN

Review of Economics & Finance, 2016, vol. 6, 93-101

Abstract: This research intends to investigate the relationship between carbon trading price and the bunker fuel index, with inputs from reviewing current greenhouse gas (GHG) mitigation management and financial measures, for the purpose of evaluating the cost implications of carbon price on the maritime industry. The Dynamic Condition Correlation Model (DCC Model) is applied for evaluating the variations of the carbon trading price and the bunker fuel index, in the light of an analysis of the proportion of fuel hedging to be used and the hedging performance. With the results of hedging performance, the cost implications of GHG mitigation management measures are investigated.

Keywords: Carbon trading price; Bunker fuel index; Constant Condition Correlation Model; Dynamic Condition Correlation Model (search for similar items in EconPapers)
JEL-codes: C43 D46 E32 E60 (search for similar items in EconPapers)
Date: 2016
Note: The authors are grateful for the financial sponsorship of the Ministry of Science and Technology (project number MOST103-2410-H-309-014 and MOST-104-2410-H-309-011).
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