Rolling over EUAs and CERs

Oscar Carchano (), Vicente Medina Martínez () and Ángel Pardo Tornero
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Oscar Carchano: Dpto. Economía Financiera y Actuarial
Vicente Medina Martínez: Facultad de Economía
Ángel Pardo Tornero: Dpto. Economía Financiera y Actuarial

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: Whatever derivative contract has a finite life limited by their maturity. The construction of long series, however, is of interest for academic, hedging and investments purposes. In this study, we analyze the relevance of the choice of the rollover date on European Union Allowances (EUAs) and Certified Emissions Reduction (CERs) futures contracts. We have used five different methodologies to construct long series and the results show that, regardless of the criterion applied, there are not significant differences between the resultant return distribution series. Therefore, the least complex method, which is to roll on the last trading day, can be used in order to reach the same conclusions. Additional liquidity analysis confirms this method as the optimum method to link EUAs and CERs series, indicating that simplicity when linking EUAs and CERs series is not at odds with liquidity.

Keywords: Rollover date; futures contracts; European Union Allowances; Certified Emission Reductions (search for similar items in EconPapers)
Pages: 19 pages
Date: 2012-05
New Economics Papers: this item is included in nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://www.ivie.es/downloads/docs/wpasad/wpasad-2012-15.pdf Fisrt version / Primera version, 2012 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2012-15

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