Futures price dynamics of CO2 emission allowances

We analyze the pricing and lead–lag relationship between spot and futures prices of CO₂ emission allowances in the EU emission trading scheme. We show that the cost-of-carry hypothesis between spot and futures prices holds for the trial period. In this period we focus on how fast a deviation from equilibrium due to shocks is restored. We derive testable restrictions on the loading coefficients and the short term dynamics within a vector error correction model. Previous studies in this field did not take into account the effects of lagged differences in the determination of the speed of adjustment. The results indicate that deviations from equilibrium are restored faster for the futures price series maturing in 2006 than for the futures price series maturing in 2007. Furthermore, we conduct an impulse response analysis using local projections with conditional confidence bands. Finally, we give an outlook for the Kyoto commitment period which is already running. In this time period so far we find that the cost-of-carry hypothesis does not hold.     

On the design of optimal grandfathering schemes for emission allowances

This paper derives optimal schemes for the free allocation of emission allowances in a dynamic context. We consider emissions- and output-based allocation rules which allow for updating of the basis of allocation over time and thereby do not rely on historical data only. We show that such dynamic schemes do not necessarily induce inefficient outcomes. In closed trading systems with an absolute cap on emissions, grandfathering schemes which allocate allowances proportionally to past emissions are first-best. However, in open trading systems where allowances can be traded with outsiders, first-best allocation schemes must not depend on firm-specific decisions while second-best schemes correspond to a Ramsey rule of optimal tax differentiation and are generally based on both past emission and output levels.     

Testing the martingale difference hypothesis in CO2 emission allowances

This study examines the martingale difference hypothesis (MDH) for the carbon emission allowance market within the European Union Emission Trading Scheme (EU ETS) during the Phase I and the Phase II, using both daily and weekly data over the 2005–2009 period. We analyze the MDH for spot prices negotiated on BlueNext, European Energy Exchange and Nord Pool along with futures prices negotiated on BlueNext and European Climate Exchange, using the new variance ratio tests developed by Kim (2009) and the generalized spectral test proposed by Escanciano and Velasco (2006). For the Phase I, the results show that the spot price changes of these three markets are predictable, suggesting the possibility of abnormal returns through speculation, except during the period April 2006 to October 2006, namely after the compliance break and before the ECs of stricter NAP II. Finally, we find that the CO₂ spot and futures price changes are unpredictable during the Phase II because we failed to reject the MDH based on both daily and weekly data. Thus, these markets are found to be weak-form efficient.     

Strategic partitioning of emission allowances under the EU Emission Trading Scheme

The EU Emission Trading Scheme (ETS) is breaking new ground in the experience with emission trading regimes across multiple jurisdictions. Since the EU ETS covers only some industries, it implies a hybrid emission control scheme where EU member states must apply complementary domestic emissions regulation for the non-trading sectors of their economies in order to comply with their national emission reduction targets. The EU ETS thus opens up for strategic partitioning of national emissions budgets by the member states between trading and non-trading sectors. In this paper we examine the potential effects of such strategic behavior on compliance cost and emissions prices. We show that concerns on efficiency losses from strategic partitioning are misplaced. In turn, our analysis implicitly indicates significant political economy forces behind EU climate policy, as both cost-effective and strategically motivated partitioning of national emission budgets are far off from the actual break-down between trading and non-trading sectors.     

Family allowances as welfare improvements

The present paper studies the equilibria of a simple overlapping generations model of pure exchange in which money is traded. There is a continuum of agents in each generation and population growth is endogenous via voluntary decisions on children. Any monetary steady state has to satisfy the golden rule that the interest rate equals the growth rate. Still such a monetary steady state may be inefficient. If raising children is not excessively profitable, then there exists a transfer scheme, in favor of those who raise children, which improves upon the steady state.     

Child allowances,educational subsidies and occupational choice

This paper examines the effects on occupational choice and capital accumulation attributable to government policies of child allowances and educational subsidies. We show that multiple steady states may arise under these two policies, with club convergence occurring, and the initial condition being of relevance, if the tax rate of labor income for skilled labor is fairly high. Under a policy of child allowances, an increase in the tax rate is found to raise the quantity of children, but lower the quality of adults; however, under a policy of educational subsidies, with an increase in the tax rate, corresponding increases are found in both the quantity of children and the quality of adults. For developed countries, introducing child allowances may improve or hurt the welfare while introducing educational subsidies is welfare improving.     

Child allowances and allocative decisions in Romanian households

In this paper it is tested whether increasing child allowances will affect the intra-household allocation of consumption, measured by child and adult goods, holding total household resources constant. The analysis is based on household survey data collected in Romania, where cash payments are made to families according to the number and age of children. Selectivity is controled for since there is the potential for self-selection bias in terms of the level of child allowances received. The findings suggest that holding total household resources constant, child allowances increase demand for child goods and calories and reduce demand for adult goods.     

选择权的价值--复杂定价模型优于简单方法吗?

将金融市场中期权的理念引入投资项目决策，产生了期权决策法及实物期权的概念。然而期权决策法在应用中也存在一些问题，其中的关键在于实物期权的定价。本探讨了B—S模型用于实物期权定价中的问题以及建立实物期权定价模型的难题，认为应当化繁为简。在决策中贯彻期权理念。而不一定非要用严密的数学模型来为实物期权定价。     

Capital depreciation allowances,redistributive taxation,and economic growth

Are capital depreciation allowances when coupled with capital income taxes good instruments for redistribution in the long run? In a simple two-agent-economy I find that accelerated depreciation is good for growth, but bad for redistribution. The opposite holds for capital income taxes. However, in a feedback Stackelberg equilibrium, where the government is the leader and the private sector the follower, the depreciation allowance is maximal in the long run, time-consistent optimum. This removes the accumulation distortion of capital income taxes. Furthermore, the latter, and so redistribution, is found to be generically nonzero in the time-consistent optimum, and depends on the social weight of transfers receivers, the pretax factor income distribution, the intertemporal elasticity of substitution and the time preference rate. Thus, accelerated depreciation allowances are an important indirect tool for redistribution. The tax scheme allows for a separation of “efficiency” and “equity” concerns for redistributive policies.     

Changes in the firms behavior after the opening of markets of allowances

This paper focuses on the influence on the general equilibrium of an economy of the opening of markets of allowances, such as the European Union Emission Trading Scheme. Assuming there existed an equilibrium before the opening of allowances’ markets, we describe the changes in the firms behavior which guarantee that an equilibrium can be reached in the enlarged economy. Hence we describe under which conditions the economy can undergo the opening of markets of allowances. This paper is a substantial improvement of previous work in collaboration with Alexandrine Jamin (Jamin and Mandel 2006).The author is grateful to Professor Jean-Marc Bonnisseau for his guidance and to an anonymous referee whose comments led to substantial improvements of the paper.     

Option exercise with temptation

This paper adopts the Gul and Pensendorfer self-control utility model to analyze an agent’s option exercise decision under uncertainty over an infinite horizon. The agent decides whether and when to do an irreversible activity. He is tempted by immediate gratification and suffers from self-control problems. The cost of self-control lowers the benefit from continuation or stopping and may erode the option value of waiting. When applied to the investment and exit problems, the model can generate the behavior of procrastination and preproperation. In addition, unlike the hyperbolic discounting model, the model here provides a unique prediction. I thank Drew Fudenberg, Bart Lipman, Neng Wang, and participants in the BU theory lunch workshop and in the Canadian Economic Theory Conference 2005 for helpful discussions. I am especially grateful for valuable suggestions from an anonymous referee and coeditor Steve Williamson. The BU ISP Seed Grant has supported this research.     

Anchoring-Adjusted Option Pricing Models

Relying on a useful starting point and attempting to adjust it appropriately is a robust human decision-making heuristic. Evidence suggests that underlying stock volatility is such a starting point, which is scaled up to estimate call option volatility. The author adjusts the Black-Scholes, Heston, and Bates models for reliance on this starting point. The adjustment mechanism captures several option-return puzzles. The adjusted Black-Scholes generates implied-volatility skew. The adjusted Heston stochastic-volatility model matches the same data better, does so at more plausible parameter values, and generates a steep short-term skew. Furthermore, 2 novel predictions are empirically tested and strongly supported in the data.     

Social security and endogenous fertility: pensions and child allowances as siamese twins

This paper analyses public pensions and child support in a model with endogenous fertility. We show that the individual fertility choice may not coincide with the social optimum, due to the existence of external effects of children on society as a whole. The market outcome without government intervention is efficient, however, as the externalities exactly cancel out in that case. If the government wants to redistribute towards the old, it cannot replicate the command optimum by merely applying lump-sum transfers, but rather needs a child allowance scheme to effectively alter the number of offspring. Finally, we analyse whether a Pareto-improving social security reform is possible. It is shown that merely reducing the PAYG-scheme cannot be Pareto-improving, but the introduction of a child allowance scheme can be.     

"股票期权"若干问题思考

“股票期权”现已在我国一些高新技术企业中试点实行,其运行中存在许多问题。本就其价格因素、激励的对象范畴以及法律环境方面存在的问题进行剖析,找出其障碍所在,并提出解决的途径,为其顺利实施创造条件。     

Option price without expected utility

We consider the meaning of the option price, commonly acknowledged as the preferred ex ante welfare measure, in the rank-dependent expected utility (RDEU) framework. The importance of this pertains to performing benefit-cost analysis when RDEU maximizers are prevalent in society.     

排污权交易的期权模型分析

排污权交易旨在利用市场机制达到治理成本和效率的优化,是治理环境的一个有效措施.本文尝试利用实物期权理论,将排污权交易视为一种旨在获取利润的投资行为,通过分析在考虑有竞争者不断进入的情况下的排污权期权价值评估模型.利用排污权期权价值的最大化去寻找最佳的排污权购买时机.     

Option moneyness and price disagreements

This article investigates price disagreements between actual and options-implied futures prices by considering option moneyness. Out-of-the-money (OTM) options trading induces price disagreements more frequently than at-the-money (ATM) options trading. Examining price adjustments to eliminate disagreements, we find that the futures (options) market tends to move less (more) for OTM option disagreements than ATM option disagreements, suggesting that the price dynamics of OTM options are less informative and noisier than that of ATM options.     

关于股票期权会计处理的探讨

股票期权作为一种激励和约束机制出现以后,如何在现行财务会计观念与模式下对它进行会计处理存在着许多观点,有“费用论”、特殊权益论”、“非会计对象论”等。文章认为,将股票期权纳入费用不论从它的理论基础,还是从其发展态势上说都将成为一种必然。     

Modelling risk premia in CO2 allowances spot and futures prices

This article analyzes the modelling of risk premia in CO₂ allowances spot and futures prices, valid for compliance under the EU Emissions Trading Scheme (EU ETS). Similarly to electricity markets, a salient characteristic of CO₂ allowances is that the theory of storage does not hold, as CO₂ allowances only exist on the balance sheets of companies regulated by the scheme. The main result features positive time-varying risk premia in CO₂ spot and futures prices, which are strictly higher for post-2012 contracts (€6–9/ton of CO₂) than for Phase II contracts (€0–6/ton of CO₂). Contrary to Benth et al.'s (2008) for electricity markets, a positive relationship between risk premia and time-to-maturity is found in the EU ETS. As for relative differences between CO₂ futures and spot prices, CO₂ futures traded between + 1% (December 2008 contract) and + 33% (December 2014 contract) above spot prices during February 2008–April 2009. Contrary to Bessembinder and Lemmon (2002) for the electricity market, a positive relationship between risk premia and the variance/skewness of CO₂ spot prices is found. The futures-spot bias to the EU ETS explains around 1–6% of the variance of CO₂ futures premia.     

股权激励的会计确认与计量

本文对国际会计准则委员会颁发的有关股权激励的征求意见稿进行了讨论，提出了在中国实行期权会计处理要解决的关键问题：(1)我国现在试行的期权制度，局限于对经理人的长期激励。(2)支付股票期权在会计上应当确认为费用，而不是税后利润的分配。(3)在目前中国，股票期权价值的计量最适合的方法是内含价值法，在特定的条件下，也可以采用最小价值法。(4)在期权确认日期上，支持在期权授权日确认股票期权的价值。