Modeling and forecasting the volatility of carbon dioxide emission allowance prices : a review and comparison of modern volatility models
dc.contributor.author | Segnon, Mawuli K. | |
dc.contributor.author | Lux, Thomas | |
dc.contributor.author | Gupta, Rangan | |
dc.contributor.email | rangan.gupta@up.ac.za | en_ZA |
dc.date.accessioned | 2017-03-30T07:54:18Z | |
dc.date.issued | 2017-03 | |
dc.description.abstract | 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 longterm 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. | en_ZA |
dc.description.department | Economics | en_ZA |
dc.description.embargo | 2018-03-31 | |
dc.description.librarian | hb2017 | en_ZA |
dc.description.uri | http://www.elsevier.com/locate/rser | en_ZA |
dc.identifier.citation | Segnon, M, Lux, T & Gupta, R 2017, 'Modeling and forecasting the volatility of carbon dioxide emission allowance prices : a review and comparison of modern volatility models', Renewable and Sustainable Energy Reviews, vol. 69, pp. 692-704. | en_ZA |
dc.identifier.issn | 1364-0321 (print) | |
dc.identifier.issn | 1879-0690 (online) | |
dc.identifier.other | /10.1016/j.rser.2016.11.060 | |
dc.identifier.uri | http://hdl.handle.net/2263/59586 | |
dc.language.iso | en | en_ZA |
dc.publisher | Elsevier | en_ZA |
dc.rights | © 2016 Elsevier Ltd. All rights reserved. Notice : this is the author’s version of a work that was accepted for publication in Renewable and Sustainable Energy Reviews . Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. A definitive version was subsequently published in Renewable and Sustainable Energy Reviews, vol. 69, pp. 692-704, 2017. doi : /10.1016/j.rser.2016.11.060. | en_ZA |
dc.subject | Carbon dioxide emission allowance prices | en_ZA |
dc.subject | GARCH | en_ZA |
dc.subject | Markov-switching GARCH | en_ZA |
dc.subject | FIGARCH | en_ZA |
dc.subject | Multifractal processes | en_ZA |
dc.subject | SPA test | en_ZA |
dc.subject | Encompassing test | en_ZA |
dc.subject | Backtesting | en_ZA |
dc.title | Modeling and forecasting the volatility of carbon dioxide emission allowance prices : a review and comparison of modern volatility models | en_ZA |
dc.type | Postprint Article | en_ZA |