TY - JOUR
T1 - Modeling CO2 emission allowance prices and derivatives
T2 - Evidence from the European trading scheme
AU - Daskalakis, George
AU - Psychoyios, Dimitris
AU - Markellos, Raphael-Nicholas
PY - 2009
Y1 - 2009
N2 - 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.
AB - 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.
KW - Derivative pricing
KW - Emission allowances
KW - Futures
KW - Options on futures
U2 - 10.1016/j.jbankfin.2009.01.001
DO - 10.1016/j.jbankfin.2009.01.001
M3 - Article
VL - 33
SP - 1230
EP - 1241
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
SN - 0378-4266
IS - 7
ER -
