The Empirical Research On Carbon Emission Permit Future Price`s Volatility With Stochastic Volatility Model

For mitigating the warming tendency of climate,mankind begins to limit the emission of greenhouse gas,and establish carbon emission permit trading markets gradually. After this,the market launches some derivative contracts based on carbon emission permit — Carbon Emission Permit Future and Option on Carbon Emission Permit Future.The price of carbon emission permit future is not only the guide of spot price of carbon emission permit, but also the subject of option,it is the vane of carbon emission permit trading markets.The EU`s carbon emission permit trading system is on the top of the world,and EUA future in EU ETS becomes the benchmark for pricing carbon emission permit.Essentially,EUA future is a future contract, and its price also has the general characteristics of financial asset price.Currently the models used to describe the volatility of EUA future`s price mainly are GARCH models.Based on this, this paper selects SV-N ? SV-T model and 512(2013-03~2014-12) daily settlement price of Dec16 contract from EU ETS,then estimates the parameters of two models with MCMC method to compare the fitting degree of them.The result shows that both SV-N model and SV-T fit EUA future price`s volatility,and SV-T model is more suitable for matching EUA future price`s volatility.