Modeling and forecasting the volatility of carbon dioxide emission allowance prices: A review and comparison of modern volatility models

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• 作者：Mawuli Segnon^a ; ^{segnon@uni-muenster.de} ; Thomas Lux^b ; ^c ; ^{thomas.lux@bwl.uni-kiel.de} ; Rangan Gupta^d ; ^{rangan.gupta@up.ac.za}
• 关键词：Q47
• 刊名：Renewable and Sustainable Energy Reviews
• 出版年：2017
• 出版时间：March 2017
• 年：2017
• 卷：69
• 期：Complete
• 页码：692-704
• 全文大小：953 K
• 卷排序：69

文摘

The launch of the markets for carbon dioxide emission allowances was guided by the aim to use the supposedly efficient price formation mechanism of an organized exchange to optimally allocate a certain quantity of emissions among potential polluters. While this introduction of a centralized trading arrangement should have helped to achieve required emission reductions with a minimum of economic losses, from the viewpoint of market participants it has raised concerns about appropriate risk management provisions to cope with the fluctuations of time-varying allowance prices. The present review provides an overview over state-of-the-art models for price volatility expanding the scope from relatively simple GARCH-type models to models with long-term dependence and regime switches including the relatively recent class of so-called multifractal models. We provide a comparative application of these models to carbon dioxide emission allowance prices from the European Union Emission Trading Scheme and evaluate their performance with up-to-date model comparison tests based on out-of-sample forecasts of future volatility and value-at-risk.