Research On The Pricing Of Carbon Finance Structured Deposits In Commercial Banks

Carbon finance business has become an important financial innovation area for the development of a low-carbon economy.Since the Kyoto Protocol in 1997 came into effect,countries around the world have paid great attention to carbon emissions,and have successively established a large number of carbon exchanges.It is precisely due to the emergence of these exchanges that carbon emission rights have become a tradable commodity.The carbon emissions that have been given carbon emission rights at prices.The “carbon finance” derived from carbon emission rights has also become an important part of the global financial markets.In 2017,China launched a nationwide unified carbon financial market,which indicates that China is moving from a pilot phase of carbon finance to a formal market-oriented operation phase.Therefore,research on the issues related to the national unified carbon financial market becomes necessary.Although China's commercial banks have been innovating and developing in the field of carbon financial products,the results achieved are not satisfactory due to our insufficient understanding of carbon finance and poor ability to bear risks.Therefore,this paper focuses on the carbon financial structured deposits of commercial banks.First of all,this paper analyzes related literature in recent years,summarizes the current research results of carbon finance and structural deposits,defines related concepts of carbon financial structured deposits,and analyzes the characteristics,development status,and existing problems of this emerging carbon financial product.Secondly,taking a structured deposit product linked to carbon emission rights issued by Industrial Bank as an example,according to the characteristics of carbon financial structured deposits,it is divided into two parts,which are regarded as a combination of a fixed income part and an embedded option part.The discounted cash flow method is used to price the fixed income component.Based on the risk-neutral theory,the BS option pricing model and Monte Carlo simulation method are used to evaluate the intrinsic value of the embedded options.This paper finds that: First,the underlying asset linked to carbon financial structural deposits is carbon emission rights.Before pricing carbon financial structural deposits,the key is to calculate the volatility of the underlying asset(carbon emission rights)during the lifetime of the product.This paper uses the GARCH family model to predict the volatility of the Shenzhen carbon emission market price,and compares the fitting effects of GARCH(1,1),GARCH-M(1,1)and TGARCH(1,1),and finds that GARCH(1,1)can better capture the fluctuation characteristics of time series.Secondly,by pricing the fixed income part and the embedded option part of the carbon financial structured deposits respectively,we can conclude that the theoretical value of the product is slightly higher than the actual issue price,which is,the initial subscription amount of 10 million RMB yuan,indicating that the Industrial Bank issued Carbon financial structural deposits is a way of discounted issuance.This is to compensate investors for risks,improve investors' psychological tolerance,and ensure the smooth issuance of carbon financial structural deposits.Thirdly,calculated based on the BS option pricing model,the actual yield to maturity of the product is 4.1264%,which is greater than the expected yield of 4.1% when the product was issued;the yield to maturity according to the Monte Carlo simulation method is 4.0670%.Almost the expected floating rate of return can also be achieved,which is 3.3% higher than the one-year time deposit rate of Industrial Bank,indicating that the product still has a certain investment value.Finally,based on the above-mentioned theoretical and empirical analysis,we provide some suggestions for the development of carbon financial structural deposits from the perspective of commercial banks,governments and investors.Commercial banks should pay attention to carbon financial products business and introduce high-quality talents to improve product design and pricing;investors should establish a correct investment philosophy based on a comprehensive understanding of carbon financial structural deposits,and cannot blindly pursue high returns;Greatly promote carbon finance,establish and improve relevant laws and regulations,and strengthen the supervision of carbon finance structured deposits.