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Risk Assessment for a Structured Product Specific to the CO2 Emission Permits Market

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  • Marius-Cristian Frunza

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, Sagacarbon - Sagacarbon SA)

  • Dominique Guegan

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

Abstract

The aim of this work is to use a new modelling technique for CO2 emission prices, in order to estimate the risk associated with a related, structured product. After a short discussion of the specificities of this market, we investigate several modelling methods for CO2 emission prices. We use these results for risk modeling of the swap between two CO2 related instruments : the European Union Allowances and the Certified Emission Reductions. We estimate the counterparty risk for this kind of transaction and evaluate the impact of different models on the risk measure and the allocated capital.

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Bibliographic Info

Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00504209.

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Date of creation: Jun 2010
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Handle: RePEc:hal:cesptp:halshs-00504209

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Related research

Keywords: Carbon ; Generalized Hyperbolic Distribution ; CER ; EUA ; Swap ; Value at Risk;

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  1. Abdou Kâ Diongue & Dominique Guegan & Rodney C. Wolff, 2010. "BL-GARCH model with elliptical distributed innovations," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers), HAL halshs-00368340, HAL.
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