Rolling over EUAs and CERs
AbstractWhatever derivative contract has a finite life limited by their maturity. The construction of long series, however, is of interest for academic, hedging and investments purposes. In this study, we analyze the relevance of the choice of the rollover date on European Union Allowances (EUAs) and Certified Emissions Reduction (CERs) futures contracts. We have used five different methodologies to construct long series and the results show that, regardless of the criterion applied, there are not significant differences between the resultant return distribution series. Therefore, the least complex method, which is to roll on the last trading day, can be used in order to reach the same conclusions. Additional liquidity analysis confirms this method as the optimum method to link EUAs and CERs series, indicating that simplicity when linking EUAs and CERs series is not at odds with liquidity.
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Bibliographic InfoPaper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2012-15.
Length: 19 pages
Date of creation: May 2012
Date of revision:
Publication status: Published by Ivie
Rollover date; futures contracts; European Union Allowances; Certified Emission Reductions;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-06-13 (All new papers)
- NEP-ENE-2012-06-13 (Energy Economics)
- NEP-ENV-2012-06-13 (Environmental Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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