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Rolling over EUAs and CERs

Author

Listed:
  • Oscar Carchano

    (Dpto. Economía Financiera y Actuarial)

  • Vicente Medina Martínez

    (Facultad de Economía)

  • Ángel Pardo Tornero

    (Dpto. Economía Financiera y Actuarial)

Abstract

Whatever derivative contract has a finite life limited by their maturity. The construction of long series, however, is of interest for academic, hedging and investments purposes. In this study, we analyze the relevance of the choice of the rollover date on European Union Allowances (EUAs) and Certified Emissions Reduction (CERs) futures contracts. We have used five different methodologies to construct long series and the results show that, regardless of the criterion applied, there are not significant differences between the resultant return distribution series. Therefore, the least complex method, which is to roll on the last trading day, can be used in order to reach the same conclusions. Additional liquidity analysis confirms this method as the optimum method to link EUAs and CERs series, indicating that simplicity when linking EUAs and CERs series is not at odds with liquidity.

Suggested Citation

  • Oscar Carchano & Vicente Medina Martínez & Ángel Pardo Tornero, 2012. "Rolling over EUAs and CERs," Working Papers. Serie AD 2012-15, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:2012-15
    as

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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2012-15.pdf
    File Function: Fisrt version / Primera version, 2012
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    References listed on IDEAS

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    8. Christopher K. Ma & Jeffrey M. Mercer & Matthew A. Walker, 1992. "Rolling over futures contracts: A note," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 12(2), pages 203-217, April.
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    Cited by:

    1. Cummins, Mark, 2013. "EU ETS market interactions: The case for multiple hypothesis testing approaches," Applied Energy, Elsevier, vol. 111(C), pages 701-709.
    2. Rannou, Yves & Barneto, Pascal, 2016. "Futures trading with information asymmetry and OTC predominance: Another look at the volume/volatility relations in the European carbon markets," Energy Economics, Elsevier, vol. 53(C), pages 159-174.

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    More about this item

    Keywords

    Rollover date; futures contracts; European Union Allowances; Certified Emission Reductions;
    All these keywords.

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