Exploring the risk spillover effects between carbon market and electricity market: A bidimensional empirical mode decomposition based conditional value at risk approach

Bangzhu Zhu, Liqing Huang, Lili Yuan, Shunxin Ye and Ping Wang

International Review of Economics & Finance, 2020, vol. 67, issue C, 163-175

Abstract: This study proposes a bidimensional empirical mode decomposition based conditional value at risk approach to explore the risk spillover effects between carbon market and electricity market. Firstly, bidimensional empirical mode decomposition is applied to decompose the pair of carbon and electricity prices into a series of simple modes with different frequencies. Secondly, conditional value at risk is used to capture the risk spillover effects between carbon market and electricity market at each frequency. The empirical results show that the risks of high frequency modes are higher than those of intermediate and low frequency modes. Carbon market has a positive risk spillover on electricity market, and electricity market has a negative risk spillover on carbon market. For high and low frequency modes, the risk spillover effects from carbon market to electricity market are positive, however those from electricity market to carbon market are negative. For intermediate frequency modes, there are bidirectional negative risk spillover effects between carbon market and electricity market.

Keywords: Risk spillover; Carbon market; Electricity market; Bidimensional empirical mode decomposition; Conditional value at risk (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056020300307
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: https://EconPapers.repec.org/RePEc:eee:reveco:v:67:y:2020:i:c:p:163-175

DOI: 10.1016/j.iref.2020.01.003

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().