Exploring the Price Volatility of Designated Financial Derivatives for EU Carbon Emission Allowances

Minghao Xie

doi:10.54254/2754-1169/2025.19702

Research Article

Open access

Published on 3 January 2025

Download pdf

Xie,M. (2025). Exploring the Price Volatility of Designated Financial Derivatives for EU Carbon Emission Allowances. Advances in Economics, Management and Political Sciences,158,68-72.

Export citation

Exploring the Price Volatility of Designated Financial Derivatives for EU Carbon Emission Allowances

Minghao Xie *^,1,

¹ Suzhou New Channel

* Author to whom correspondence should be addressed.

https://doi.org/10.54254/2754-1169/2025.19702

Abstract

Determining the price of financial derivatives and the relationship between the EU carbon emission quota and derivatives price fluctuation are the core of carbon emission quota trading. This has a great impact on the stable development of the carbon emission quota market. This paper collects and uses the market data of financial derivatives, uses EVIEWS as a tool, and uses econometric knowledge to analyze. It is found that the two main factors, best_ask, and best_bid, have a significant impact on financial prices. When analyzing the complexity of the financial derivatives market, this paper not only relies on EVIEWS' intuitive data display function but also skillfully combines many econometric methods such as time series analysis and regression analysis. The comprehensive application of these methods enables us to capture the market dynamics more comprehensively and reveal the deep-seated laws hidden behind the data. This paper provides relevant suggestions for China to promote the green transformation of enterprises and reduce carbon emissions.

Keywords

Eviews tools, Econometrics, EU carbon emission allowances, Financial derivatives

View pdf

References

[1]. Huang Feihong. (2011). Research on Carbon Financial Derivatives Pricing Based on the EU Carbon Emissions Trading System (Masters Thesis, Guangdong Business School). Masters Degree

[2]. Chesney, M., & Taschini, L. (2012). The endogenous price dynamics of emission allowances and an application to CO2 option pricing. Applied Mathematical Finance, 19 (5), 447-475.

[3]. Wang Feng, Wu Lihua & Yang Chao. (2010). Research on the driving factors of carbon emission growth in Chinas economic development. Economic Research (02), 123-136.

[4]. Wu Hengyu & Wu Huanqun. (2008). New option pricing with stochastic price volatility. Systems Engineering (02), 20-24.

[5]. Annunziata, F. (2021). Emission Allowances as Financial Instruments. Sustainable Finance in Europe: Corporate Governance, Financial Stability and Financial Markets, 477-503.

[6]. Daskalakis, G., Psychoyios, D., & Markellos, R. N. (2009). Modeling CO2 emission allowance prices and derivatives: Evidence from the European trading scheme. Journal of Banking & Finance, 33 (7), 1230-1241.

[7]. Carbon Finance Research Group of CUHK Consulting Energy Division (2021), Carbon Finance Research Topic 1: Analysis of the Connotation of Carbon Finance and the Development Status of the Narrow Carbon Finance Market. https://zhuanlan.zhihu.com/p/419354025

[8]. Jotzo, F., & Löschel, A. (2014). Emissions trading in China: Emerging experiences and international lessons. Energy Policy, 75, 3-8.

[9]. Yang Qing & Zhang Yu. (2021). Innovation and development trends of carbon finance in China. Financial Expo (03), 11-13.

[10]. 10Ellerman, A. D. (2005). US Experience with emissions trading: Lessons for CO2 emissions trading. Emissions trading for climate policy: US and European perspectives, 78-95.

Cite this article

Xie,M. (2025). Exploring the Price Volatility of Designated Financial Derivatives for EU Carbon Emission Allowances. Advances in Economics, Management and Political Sciences,158,68-72.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

Disclaimer/Publisher's Note

The statements, opinions and data contained in all publications are solely those of the individual author(s) and contributor(s) and not of EWA Publishing and/or the editor(s). EWA Publishing and/or the editor(s) disclaim responsibility for any injury to people or property resulting from any ideas, methods, instructions or products referred to in the content.

About volume

Volume title: Proceedings of CONF-BPS 2025 Workshop: Sustainable Business and Policy Innovations

Conference website: https://2025.confbps.org/

ISBN：978-1-83558-877-2(Print) / 978-1-83558-878-9(Online)

Conference date: 20 February 2025

Editor：Li Chai

Series: Advances in Economics, Management and Political Sciences

Volume number: Vol.158

ISSN：2754-1169(Print) / 2754-1177(Online)

© 2024 by the author(s). Licensee EWA Publishing, Oxford, UK. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license. Authors who publish this series agree to the following terms:
1. Authors retain copyright and grant the series right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this series.
2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the series's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this series.
3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See Open access policy for details).