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

Author

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  • Marius-Cristian Frunza

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, Sagacarbon - Sagacarbon SA)

  • Dominique Guegan

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

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.

Suggested Citation

  • Marius-Cristian Frunza & Dominique Guegan, 2010. "Risk Assessment for a Structured Product Specific to the CO2 Emission Permits Market," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00504209, HAL.
    • Handle: RePEc:hal:cesptp:halshs-00504209
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00504209
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    References listed on IDEAS

    as
    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) halshs-00368340, HAL.
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    More about this item

    Keywords

    Carbon; Carbone; Generalized Hyperbolic Distribution; CER; EUA; Swap; Value at Risk;
    All these keywords.

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