A comparison of reduced-form permit price models and their empirical performances
AbstractEquilibrium 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 InfoPaper 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.
Date of creation: Dec 2010
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