Pricing CO2 Emission Allowance Derivatives Following Tempered Stable GARCH Models

• Main Authors: Sin- luan Chen, 陳馨灤
• Other Authors: Sharon S.Yang
• Format: Others
• Language: zh-TW
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/90440077858759002347

碩士 === 國立中央大學 === 財務金融研究所 === 99 === Empirical studies show that the hypothesis of normal distribution of residuals was often rejected. Therefore, this paper presents GARCH models with an infinitely divisible distributed innovation, referred to as the classical tempered stable (CTS) GARCH model and the rapidly decreasing tempered stable (RDTS) GARCH model to catch the dynamic process of CO2 emission spot price. This paper compares the performance of normal-GARCH, stable-GARCH, CTS-GARCH, and RDTS-GARCH models using EUAs data obtained from Bluenext environmental exchange and finds that RDTS-GARCH model has a better fitness than others. Our empirical results show the NORMAL-GARCH model tends to overestimate the price of EUAs future options. But the results are virtually similar by using either CTS-GARCH model or RDTS-GARCH model, which means that the model risk of tempered stable-GARCH model is lower.