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An econometric analysis of emission allowance prices


Paolella, Marc S; Taschini, Luca (2008). An econometric analysis of emission allowance prices. Journal of Banking and Finance, 32(10):2022-2032.

Abstract

Knowledge of the statistical distribution of the prices of emission allowances, and their forecastability, are crucial in constructing, among other things, purchasing and risk management strategies in the emissions-constrained markets. This paper analyzes the two emission permits markets, CO2 in Europe, and SO2 in the US, and investigates a model for dealing with the unique stylized facts of this type of data. Its effectiveness in terms of model fit and out-of-sample value-at-risk-forecasting, as compared to models commonly used in risk-forecasting contexts, is demonstrated.

Abstract

Knowledge of the statistical distribution of the prices of emission allowances, and their forecastability, are crucial in constructing, among other things, purchasing and risk management strategies in the emissions-constrained markets. This paper analyzes the two emission permits markets, CO2 in Europe, and SO2 in the US, and investigates a model for dealing with the unique stylized facts of this type of data. Its effectiveness in terms of model fit and out-of-sample value-at-risk-forecasting, as compared to models commonly used in risk-forecasting contexts, is demonstrated.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Language:English
Date:October 2008
Deposited On:05 Feb 2009 15:16
Last Modified:05 Apr 2016 12:51
Publisher:Elsevier
ISSN:0378-4266
Publisher DOI:https://doi.org/10.1016/j.jbankfin.2007.09.024
Related URLs:http://ssrn.com/abstract=947055
http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=605723 (Author)

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