Modeling CO2 emission allowance prices and derivatives:Evidence from the European trading scheme

Daskalakis, George, Psychoyios, Dimitris and Markellos, Raphael-Nicholas (2009) Modeling CO2 emission allowance prices and derivatives:Evidence from the European trading scheme. Journal of Banking & Finance, 33 (7). pp. 1230-1241. ISSN 1872-6372

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Abstract

This paper studies the three main markets for emission allowances within the European Union Emissions Trading Scheme (EU ETS): Powernext, Nord Pool and European Climate Exchange (ECX). The analysis suggests that the prohibition of banking of emission allowances between distinct phases of the EU ETS has significant implications in terms of futures pricing. Motivated by these findings, we develop an empirically and theoretically valid framework for the pricing and hedging of intra-phase and inter-phase futures and options on futures, respectively.

Item Type: Article
Uncontrolled Keywords: derivative pricing,emission allowances,futures,options on futures
Faculty \ School: Faculty of Social Sciences > Norwich Business School
University of East Anglia > Faculty of Social Sciences > Research Groups > Accounting, Finance and Governance
Depositing User: Raphael Markellos
Date Deposited: 27 Oct 2011 09:17
Last Modified: 25 Jul 2018 04:48
URI: https://ueaeprints.uea.ac.uk/id/eprint/35197
DOI: 10.1016/j.jbankfin.2009.01.001

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