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A comparison of reduced-form permit price models and their empirical performances

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  • Georg Grüll
  • Luca Taschini
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    Abstract

    Equilibrium models have been proposed in literature with the aim of describing the evolution of the price of emission permits. This paper derives first a reduced-form model from an equilibrium model and thereby explains how existing reduced-form models are related to equilibrium models. Second, by means of calibration to historical data, it is shown how these reduced-form models perform in the current price-evolution framework also with respect to standard continuous time stochastic models.

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    Bibliographic Info

    Paper provided by Grantham Research Institute on Climate Change and the Environment in its series Grantham Research Institute on Climate Change and the Environment Working Papers with number 33.

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    Date of creation: Dec 2010
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    Handle: RePEc:lsg:lsgwps:wp33

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    7. Paolella, Marc S. & Taschini, Luca, 2008. "An econometric analysis of emission allowance prices," Journal of Banking & Finance, Elsevier, vol. 32(10), pages 2022-2032, October.
    8. Maria Mansanet-Bataller & Angel Pardo & Enric Valor, 2007. "CO2 Prices, Energy and Weather," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 73-92.
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    Cited by:
    1. Pauline Barrieu & Max Fehr, 2011. "Integrated EUA and CER price modeling and application for spread option pricing," LSE Research Online Documents on Economics 37576, London School of Economics and Political Science, LSE Library.

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