A Comparison of Reduced-Form Permit Price Models and Their Empirical Performances
MIT CEEPR Working Paper Series, WP-2009-018
26 Pages Posted: 23 Dec 2009 Last revised: 5 Dec 2010
Date Written: September 17, 2009
Abstract
Equilibrium models have been proposed in literature with the aim of describing the evolution of the price of emission permits. This paper derives first estimation methods for the calibration of three competing equilibrium models. Second, it demonstrates how their reduced-form versions are inter-related. Third, by means of calibration to historical data, it is shown how these reduced-form models perform in the current price-evolution framework also with respect to standard continuous time stochastic models.
Keywords: CO2 emission allowances, Equilibrium model, Model calibration
JEL Classification: C02, C61, C63, C65, G13
Suggested Citation: Suggested Citation
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