Economics at your fingertips  

The forecasting accuracy of implied volatility from ECX carbon options

Svetlana Viteva, Yulia Veld-Merkoulova and Kevin Campbell

Energy Economics, 2014, vol. 45, issue C, 475-484

Abstract: This study analyzes the forecasting accuracy of the implied volatility of options on futures contracts for the delivery of CO2 emission allowances (carbon options) traded on the European Climate Exchange. We demonstrate that option implied volatility is highly informative about the variance of returns realized over the remaining life of the options. It is also directionally accurate in predicting future volatility changes. However, we also find that implied volatility of carbon options is biased, especially for periods of time which do not coincide with the remaining life of the option. This suggests that the market has yet to fully mature.

Keywords: Carbon options; Implied volatility; Volatility forecasting; EU Emissions Trading Scheme (search for similar items in EconPapers)
JEL-codes: G13 Q5 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-03-31
Handle: RePEc:eee:eneeco:v:45:y:2014:i:c:p:475-484