Modeling Volatility and Dependence of European Carbon and Energy Prices

Autor:	Berrisch, Jonathan, Pappert, Sven, Ziel, Florian, Arsova, Antonia
Rok vydání:	2022
Předmět:	Quantitative Finance - Statistical Finance Computer Science - Machine Learning Economics - Econometrics Statistics - Applications Statistics - Computation 62H05 62M10 91B84 G.3 J.4 I.6.3
Druh dokumentu:	Working Paper
DOI:	10.1016/j.frl.2022.103503
Popis:	We study the prices of European Emission Allowances (EUA), whereby we analyze their uncertainty and dependencies on related energy prices (natural gas, coal, and oil). We propose a probabilistic multivariate conditional time series model with a VECM-Copula-GARCH structure which exploits key characteristics of the data. Data are normalized with respect to inflation and carbon emissions to allow for proper cross-series evaluation. The forecasting performance is evaluated in an extensive rolling-window forecasting study, covering eight years out-of-sample. We discuss our findings for both levels- and log-transformed data, focusing on time-varying correlations, and in view of the Russian invasion of Ukraine. Comment: Accepted for publication in Finance Research Letters
Databáze:	arXiv
Externí odkaz:	http://arxiv.org/abs/2208.14311 Zobrazit plný text záznamu View this record from Arxiv