Equilibrium Price Dynamics of Emission Permits

2018 ◽  
Vol 53 (4) ◽  
pp. 1653-1678 ◽  
Author(s):  
Steffen Hitzemann ◽  
Marliese Uhrig-Homburg
Keyword(s):  
Option Pricing ◽  
Empirical Evidence ◽  
Equilibrium Model ◽  
Equilibrium Price ◽  
Contingent Claims ◽  
Emission Permits ◽  
Emission Permit ◽  
Environmental Markets ◽  
Forward Price ◽  
Highly Nonlinear

This article presents a stochastic equilibrium model for environmental markets that allows us to study the characteristic properties of emission permit prices induced by the design of today’s cap-and-trade systems. We characterize emission permits as highly nonlinear contingent claims on economy-wide emissions and reveal their hybrid nature between investment and consumption assets. Our model makes predictions about the dynamics and volatility structure of emission permit prices, the forward price curve, and the implications for option pricing in this market. Empirical evidence from existing emissions markets shows that the model explains the stylized facts of emission permit prices and related derivatives.

The Theoretical and Empirical Research on Pricing of China's Carbon Emission Permits

2012 ◽  
Vol 524-527 ◽  
pp. 2474-2481
Author(s):  
Zhi Gang Huang ◽  
Jiao Ling Xie ◽  
Wen Ping Wu
Keyword(s):  
Option Pricing ◽  
Carbon Emissions ◽  
Carbon Emission ◽  
Supply And Demand ◽  
Practical Significance ◽  
Emission Permits ◽  
Transaction Data ◽  
Carbon Finance ◽  
Relationship Of ◽  
The Relationship

Carbon emissions permits has its own particularity,and with the development of carbon finance,carbon emissions permits possess the commodity attributes and financial attributes.So its price isn’t determined only by the relationship of commodity supply and demand,but also affected by a variety of factors.But because the transaction data is not available,so the pricing of the carbon emissions permits can not really consider from the angle of the influencing factors of price.Therefore, this paper is on the basis of previous studies using mathematical tools and introducing the option pricing mechanism to study th pricing of China's carbon emissions permits basing on carbon emissions,which is designed for providing reference on the pricing of China's carbon emissions,being of both theoretical and practical significance.

scholarly journals PREFERENCES, LÉVY JUMPS AND OPTION PRICING

2007 ◽  
Vol 03 (01) ◽  
pp. 0750001 ◽  
Author(s):  
CHENGHU MA
Keyword(s):  
Option Pricing ◽  
Contingent Claims ◽  
Economic Variable ◽  
European Options ◽  
Jump Risk ◽  
Representative Agent ◽  
Potential Explanation ◽  
Black Scholes Model ◽  
Black Scholes ◽  
Lévy Jumps

This paper derives an equilibrium formula for pricing European options and other contingent claims which allows incorporating impacts of several important economic variable on security prices including, among others, representative agent preferences, future volatility and rare jump events. The derived formulae is general and flexible enough to include some important option pricing formulae in the literature, such as Black–Scholes, Naik–Lee, Cox–Ross and Merton option pricing formulae. The existence of jump risk as a potential explanation of the moneyness biases associated with the Black–Scholes model is explored.

NOMINAL RIGIDITIES, RESIDENTIAL INVESTMENT, AND ADJUSTMENT COSTS

2009 ◽  
Vol 14 (1) ◽  
pp. 136-148 ◽  
Author(s):  
Charles T. Carlstrom ◽  
Timothy S. Fuerst
Keyword(s):  
General Equilibrium ◽  
Empirical Evidence ◽  
Equilibrium Model ◽  
Durable Goods ◽  
Adjustment Costs ◽  
American Economic Review ◽  
Housing Construction ◽  
Residential Housing ◽  
Habit Persistence ◽  
Residential Investment

Evidence suggests that durable goods and residential housing are more flexibly priced than nondurables and services. Using a standard sticky price general equilibrium model, Barsky, House, and Kimball [American Economic Review 97(3) (2007), 984–998] demonstrate that if durable goods are flexibly priced and nondurables are sticky, then a monetary contraction leads to an expansion in production in the durable sector. This is wildly at odds with the empirical evidence. This paper demonstrates that if three features are added to the model (sticky nominal wages, housing construction adjustment costs, and habit persistence in consumption), it delivers sectoral implications that are broadly consistent with the data.

scholarly journals Management of air pollution by a system of transferable individual emission permits with overlapping generations.

2019 ◽  
Vol 2 (1) ◽  
Author(s):  
TCHOUSSO Adamou
Keyword(s):  
Air Pollution ◽  
Young People ◽  
Equilibrium Model ◽  
Overlapping Generations ◽  
Cooperative Behavior ◽  
Future Generation ◽  
Emission Permits ◽  
Pollution Management ◽  
Intergenerational Altruism

The purpose of this article is to analyze the effectiveness of a pollution management system through individual permits that are distributed to young people with overlapping generations. From a general equilibrium model, the results show that such a system provides the conditions for optimal pollution management. But because of the non-cooperative behavior of the actors, this policy cannot institute intergenerational altruism. Incentives such as tax or subsidy are needed to get the receiving population to better choose between the physical good whose production satisfies their needs and the quality of the environment that depends on their option to sell the permits to firms or the future generation.

scholarly journals IDENTIFYING NEWS SHOCKS WITH FORECAST DATA

2019 ◽  
pp. 1-30 ◽  
Author(s):  
Yasuo Hirose ◽  
Takushi Kurozumi
Keyword(s):  
Business Cycle ◽  
General Equilibrium ◽  
Empirical Evidence ◽  
Equilibrium Model ◽  
Dynamic Stochastic General Equilibrium ◽  
Output Growth ◽  
News Shocks ◽  
Business Cycle Fluctuations ◽  
Forecast Data ◽  
Dynamic Stochastic

The empirical importance of news shocks—anticipated future shocks—in business cycle fluctuations has been explored by using only actual data when estimating models augmented with news shocks. This paper additionally exploits forecast data to identify news shocks in a canonical dynamic stochastic general equilibrium model. The estimated model shows new empirical evidence that technology news shocks are a major source of fluctuations in US output growth. Exploiting the forecast data not only generates more precise estimates of news shocks and other parameters in the model, but also increases the contribution of technology news shocks to the fluctuations.

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