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Rolling over EUAs and CERs

Author

Listed:
  • Oscar Carchano

    () (Dpto. Economía Financiera y Actuarial)

  • Vicente Medina Martínez

    () (Facultad de Economía)

  • Ángel Pardo Tornero

    (Dpto. Economía Financiera y Actuarial)

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.

Suggested Citation

  • Oscar Carchano & Vicente Medina Martínez & Ángel Pardo Tornero, 2012. "Rolling over EUAs and CERs," Working Papers. Serie AD 2012-15, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  • Handle: RePEc:ivi:wpasad:2012-15
    as

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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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    References listed on IDEAS

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    1. repec:dau:papers:123456789/6969 is not listed on IDEAS
    2. repec:ebl:ecbull:v:30:y:2010:i:1:p:558-576 is not listed on IDEAS
    3. 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.
    4. Medina, Vicente & Pardo, Ángel & Pascual, Roberto, 2014. "The timeline of trading frictions in the European carbon market," Energy Economics, Elsevier, vol. 42(C), pages 378-394.
    5. Maria Mansanet-Bataller & Ángel Pardo, 2008. "What You Should Know About Carbon Markets," Energies, MDPI, Open Access Journal, vol. 1(3), pages 1-34, December.
    6. repec:dau:papers:123456789/4226 is not listed on IDEAS
    7. Chevallier, Julien, 2011. "A model of carbon price interactions with macroeconomic and energy dynamics," Energy Economics, Elsevier, vol. 33(6), pages 1295-1312.
    8. Julien Chevallier & Benoît Sévi, 2011. "On the realized volatility of the ECX CO 2 emissions 2008 futures contract: distribution, dynamics and forecasting," Annals of Finance, Springer, pages 1-29.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Rannou, Yves & Barneto, Pascal, 2016. "Futures trading with information asymmetry and OTC predominance: Another look at the volume/volatility relations in the European carbon markets," Energy Economics, Elsevier, vol. 53(C), pages 159-174.
    2. Cummins, Mark, 2013. "EU ETS market interactions: The case for multiple hypothesis testing approaches," Applied Energy, Elsevier, pages 701-709.

    More about this item

    Keywords

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

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