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Estimating the ‘value at risk’ of EUA futures prices based on the extreme value theory

Mi, ZF; Zhang, YJ; (2011) Estimating the ‘value at risk’ of EUA futures prices based on the extreme value theory. International Journal of Global Energy Issues , 35 (2-4) pp. 145-157. 10.1504/IJGEI.2011.045027. Green open access

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Abstract

This paper employs the Extreme Value Theory (EVT) to measure the 'Value at Risk' (VaR) of EUA futures prices. The results show that during the sample period: first, the EVT approach can be used to reliably measure the extreme risk of carbon futures markets of the European Union Emissions Trading Scheme, both for Phase I and Phase II. Second, the downside extreme risk of carbon futures market outweighs the upside risk, with evident asymmetric features. Moreover, the average VaR of carbon futures contract DEC10 proves much less than that of contract DEC07 during the sample period.

Type: Article
Title: Estimating the ‘value at risk’ of EUA futures prices based on the extreme value theory
Open access status: An open access version is available from UCL Discovery
DOI: 10.1504/IJGEI.2011.045027
Publisher version: http://dx.doi.org/10.1504/IJGEI.2011.045027
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords: EU ETS; European Union Emissions Trading Scheme; EVT; extreme value theory; VaR; value at risk; carbon market; carbon trading; carbon emissions; CO2; carbon dioxide; carbon futures.
UCL classification: UCL
UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL BEAMS
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment > The Bartlett Sch of Const and Proj Mgt
URI: https://discovery.ucl.ac.uk/id/eprint/10022857
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