Research On Assessment Of Emission Rights Based On Option Pricing Model

The reason that evolution of humans can promote the development of social civilization is that people can always improve their realization via practice and utilize the subjective initiative to perfect the practice. The great popularity of green initiative nowadays is owing to the prominence of safety demands with developed economy and quite satisfaction with materials. Humans gradually realize that the great cost like environmental pollution and resources shortages they have paid for past One-sided pursue economic development, posing threat to people’s health as well as steady and long-term development. Therefore, people are starting to minimize the damage to the environment with their wisdom, bring great development in natural and social science. The emission rights studied in this paper can be taken as an illustration.The paper will first reveal the necessity and significance of emission control under the circumstance of environmental pollution. The heavy burden of emission on the power industry will be highlighted by analyzing domestic environment data. Seen from domestic emission policy, the imported concept of emission rights are gaining vigor gradually and incurring a series of problems. The paper here will carry out the study in view of valuation of the emission rights.This paper will first make a logical combing of the development progress of emission rights theory.The first section is the understanding of environmental value, that is the value of the environmental capacity resources.With the confirmation of the externality of environmental capacity resources.environmental value needs to get the recognition of the price urgently. Theory of Property rights and Coase Theorem lay a theoretical foundation of the market-oriented environmental value. It is due to the accumulation of these theories that emission rights can come into being.The reason that the theme of this paper the valuation of emission rights of study significance is that the valuation has been equipped with availability and necessity by the all around development of emission rights transaction in China. Based on the selection criteria of the assessment methods, the paper will discuss the selection process of the assessment methods, and finally the Option Method has been selected to evaluate emission rights. The greatest advantage of Option Valuation is the consideration of selective value. And selectivity is the biggest characteristic of emission rights. Owing to this selectivity, emission rights can play a regulatory role in economy, which can also achieve optimal allocation of resources.The article core is the detailed analysis of the emission rights option and to define its value. In order to highlight the operability of the method, the author chooses Power Company as an example. The article finally constructs the value mode of emission rights, with consideration of18cases of the emission rights option, the usage of Option Pricing Model and shadow price to determine the option value.There may be three contributions of this article:Firstly, it is a new perspective from the position of emission rights’owners to estimate emissions value. Secondly, to estimate emissions value with options is also a novel estimate method in the current research. Thirdly, the article analyzes the strategic choices of emission rights deeply with option methods, combining the estimation and strategies, which is also a novel research idea in the research.