Related papers: Understanding the explosive trend in EU ETS prices…
Increases in global food prices have led to widespread hunger and social unrest---and an imperative to understand their causes. In a previous paper published in September 2011, we constructed for the first time a dynamic model that…
Carbon pricing has become a central pillar of modern climate policy, with carbon taxes and emissions trading systems (ETS) serving as the two dominant approaches. Although economic theory suggests these instruments are equivalent under…
This paper investigates the impact of carbon pricing under the EU Emissions Trading System (EU ETS) on the Italian electricity market, focusing on the carbon cost pass-through rate (CPTR) across market zones during Phases 3 and 4…
Mandatory emission trading schemes are being established around the world. Participants of such market schemes are always exposed to risks. This leads to the creation of an accompanying market for emission-linked derivatives. To evaluate…
In this paper we investigate the causal impact of the European Union Emissions Trading System, a cap-and-trade scheme limiting greenhouse gas emissions of firms, on their environmental performance. Although previous studies have focused…
The paper investigates the performance of the European option price when the log asset price follows a rich class of Generalized Tempered Stable (GTS) distribution. The GTS distribution is an alternative to Normal distribution and…
The large variability of renewable power sources is a central challenge in the transition to a sustainable energy system. Electricity markets are central for the coordination of electric power generation. These markets rely evermore on…
A growing number of contributions in the literature have identified a puzzle in the European carbon allowance (EUA) market. Specifically, a persistent cost-of-carry spread (C-spread) over the risk-free rate has been observed. We are the…
Emissions markets play a vital role in emissions reduction by incentivizing firms to minimize costs. However, their effectiveness heavily depends on the decisions of policymakers, future economic activity, and the availability of abatement…
To understand the emergence of Ultrafast Extreme Events (UEEs), the influence of algorithmic trading or high-frequency traders is of major interest as they make it extremely difficult to intervene and to stabilize financial markets. In an…
The European Power Exchange has introduced day-ahead auctions and continuous trading spot markets to facilitate the insertion of renewable electricity. These markets are designed to balance excess or lack of power in short time periods,…
The increasing importance of renewable energy, especially solar and wind power, has led to new forces in the formation of electricity prices. Hence, this paper introduces an econometric model for the hourly time series of electricity prices…
Under a generalized skew normal distribution we consider the problem of European option pricing. Existence of the martingale measure is proved. An explicit expression for a given European option price is presented in terms of the cumulative…
We analyse the drivers of European Power Exchange (EPEX) wholesale electricity prices between 2012 and early 2022 using machine learning. The agnostic random forest approach that we use is able to reduce in-sample root mean square errors…
We present an analysis of oil prices in US$ and in other major currencies that diagnoses unsustainable faster-than-exponential behavior. This supports the hypothesis that the recent oil price run-up has been amplified by speculative…
As the European countries strive to meet their ambitious climate goals, renewable hydrogen has emerged to aid in decarbonizing energy-intensive sectors and support the overall energy transition. To ensure that hydrogen production aligns…
We consider the problem of valuing a European option written on an asset whose dynamics are described by an exponential L\'evy-type model. In our framework, both the volatility and jump-intensity are allowed to vary stochastically in time…
As the European countries strive to meet their ambitious climate goals, renewable hydrogen has emerged to aid in decarbonizing energy-intensive sectors and support the overall energy transition. To ensure that hydrogen production aligns…
An important step in the Financial Benchmarks Reform was taken on 13th September 2018, when the ECB Working Group on Euro Risk-Free Rates recommended the Euro Short-Term Rate ESTR as the new benchmark rate for the euro area, to replace the…
This paper examines how regulatory interventions in high-frequency financial markets affect price discovery. We focus on Breaking news, where dynamic circuit breakers trigger trading halts immediately after the release of macroeconomic…