RT Journal Article
SR Electronic
T1 Risk Assessment for a Structured Product Specific<br/>to the CO<sub>2</sub> Emission Permits Market
JF The Journal of Alternative Investments
FD Institutional Investor Journals
SP 72
OP 91
DO 10.3905/jai.2012.15.3.072
VO 15
IS 3
A1 Marius-Christian Frunza
A1 Dominique Guegan
YR 2012
UL https://pm-research.com/content/15/3/72.abstract
AB The aim of this article is to use a new modeling technique for CO2 emission prices to estimate the risk associated with a related, structured product. After a short discussion of the specificities of this market, the author investigates several modeling methods for CO2 emission prices and uses these results for risk modeling of the swap between two CO2-related instruments: the European Union allowances and the certified emission reductions. We also estimate the counterparty risk for this kind of transaction and evaluate the impact of different models on the risk measure and the allocated capital.TOPICS: ESG investing, fixed income and structured finance, developed markets, legal/regulatory/public policy