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Rolling over EUAs and CERs

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Author Info

  • Oscar Carchano

    ()
    (Dpto. Economía Financiera y Actuarial)

  • Vicente Medina Martínez

    ()
    (Facultad de Economía)

  • Ángel Pardo Tornero

    (Dpto. Economía Financiera y Actuarial)

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    Abstract

    Whatever 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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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2012-15.pdf
    File Function: Fisrt version / Primera version, 2012
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    Bibliographic Info

    Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2012-15.

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    Length: 19 pages
    Date of creation: May 2012
    Date of revision:
    Publication status: Published by Ivie
    Handle: RePEc:ivi:wpasad:2012-15

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    Related research

    Keywords: Rollover date; futures contracts; European Union Allowances; Certified Emission Reductions;

    This paper has been announced in the following NEP Reports:

    References

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    1. Chevallier, Julien, 2011. "A model of carbon price interactions with macroeconomic and energy dynamics," Economics Papers from University Paris Dauphine 123456789/6969, Paris Dauphine University.
    2. Rittler, Daniel, 2012. "Price discovery and volatility spillovers in the European Union emissions trading scheme: A high-frequency analysis," Journal of Banking & Finance, Elsevier, vol. 36(3), pages 774-785.
    3. Julien Chevallier & Benoît Sévi, 2009. "On the Realized Volatility of the ECX CO2 Emissions 2008 Futures Contract: Distribution, Dynamics and Forecasting," Working Papers 2009.113, Fondazione Eni Enrico Mattei.
    4. Julien Chevallier, 2010. "EUAs and CERs: Vector Autoregression, Impulse Response Function and Cointegration Analysis," Economics Bulletin, AccessEcon, vol. 30(1), pages 558-576.
    5. repec:ebl:ecbull:v:30:y:2010:i:1:p:558-576 is not listed on IDEAS
    6. Maria Mansanet-Bataller & Ángel Pardo, 2008. "What You Should Know About Carbon Markets," Energies, MDPI, Open Access Journal, vol. 1(3), pages 120-153, December.
    7. Vicente Medina Martínez & Ángel Pardo Tornero & Roberto Pascual, 2012. "The timeline of trading fricions in the European Carbon Market," Working Papers. Serie AD 2012-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
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