Derivative pricing and hedging on Carbon Market

Marius-Cristian Frunza () and Dominique Guegan ()
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Marius-Cristian Frunza: Structuring Department - Sagacarbon et Centre d'Economie de la Sorbonne, 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 analyze 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 diffusions and generalized hyperbolic distributions. These models are used for pricing and hedging of carbon options. We estimate the pricing accuracy of each model and the capacity to provide an efficient dynamic hedging

Keywords: Carbon; Normal Inverse Gaussian; CER; EUA; swap (search for similar items in EconPapers)
Pages: 5 pages
Date: 2010-01
New Economics Papers: this item is included in nep-ene and nep-env
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Citations: View citations in EconPapers (2)

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http://mse.univ-paris1.fr/pub/mse/CES2010/10007.pdf (application/pdf)

Related works:
Working Paper: Derivative Pricing and Hedging on Carbon Market (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:10007

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