{"id":3865,"date":"2011-03-01T14:08:03","date_gmt":"2011-03-01T14:08:03","guid":{"rendered":"https:\/\/www.lse.ac.uk\/granthaminstitute\/?post_type=publication&p=3865"},"modified":"2024-08-19T14:33:29","modified_gmt":"2024-08-19T13:33:29","slug":"integrated-eua-and-cer-price-modelling-and-application-for-spread-option-pricing-working-paper-40","status":"publish","type":"publication","link":"https:\/\/www.lse.ac.uk\/granthaminstitute\/publication\/integrated-eua-and-cer-price-modelling-and-application-for-spread-option-pricing-working-paper-40\/","title":{"rendered":"Integrated EUA and CER price modelling and application for spread option pricing"},"content":{"rendered":"\n

Working Paper 40<\/h2>\n

Abstract<\/h3>\n

In this paper, we propose a market consistent futures price dynamics model for cap-and-trade schemes, designed in the spirit of the European Union’s Emissions Trading Scheme (EU ETS).<\/p>\n

Historical price dynamics for the EU ETS suggest that both European emission Allowances (EUAs) and Certified Emission Reductions (CERs) certificates, which are generated through the Clean Development Mechanism (CDM) – a non-domestic offset mechanism – are significantly related.<\/p>\n

We use an equilibrium framework to demonstrate that compliance regulation singles out special joint futures price dynamics.<\/p>\n

Based on this result, we propose an arbitrage-free futures price model, and apply it to the pricing of spread options between EUAs and CERs.<\/p>\n

Pauline Barrieu and Max Fehr<\/p>\n\n","protected":false},"excerpt":{"rendered":"\n

Working Paper 40 Abstract In this paper, we propose a market consistent futures price dynamics model for cap-and-trade schemes, designed…<\/p>\n\n","protected":false},"author":43,"featured_media":0,"template":"","tags":[204,98],"publication-type":[435],"topic_area":[4694],"class_list":["post-3865","publication","type-publication","status-publish","hentry","tag-cdm","tag-eu-ets","publication-type-working-papers","topic_area-policy-evaluation"],"acf":{"downloads":{"ref_value":"field_52f16cc1a80f2","value":["https:\/\/www.lse.ac.uk\/granthaminstitute\/wp-content\/uploads\/2014\/02\/eua-cer-price-modelling_Barrieu-etal.pdf"],"type":"download","post_type":""},"profile_link":{"ref_value":"field_52f164b5189e9","value":["pauline-barrieu"],"type":"relationship","post_type":"profile"},"spotlight":{"ref_value":"field_52f80896506d3","value":"","type":false,"post_type":""},"exclude_from_sync":{"ref_value":"field_560538b0e7350","value":"0","type":false,"post_type":""},"rss_newsletter":{"ref_value":"field_54f5c2c1544d8","value":"","type":false,"post_type":""}},"yoast_head":"\nIntegrated EUA and CER price modelling and application for spread option pricing - 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