Overview
- Provides a description of carbon markets, which are being implemented worldwide, and their role in the mitigations of climate change
- Most sections are accessible to practitioners in the energy sector and climate change policy-makers
- Contains a case study of the UK energy market
- Contains an introduction to forward-backward stochastic differential equations (FBSDE) and their application to carbon markets
- Includes supplementary material: sn.pub/extras
Part of the book series: Mathematics of Planet Earth (MPE)
Part of the book sub series: SpringerBriefs in Mathematics of Planet Earth (SBMPE-WCO)
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Table of contents (5 chapters)
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Front Matter
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Back Matter
Keywords
About this book
In Mathematical Finance, the authors consider a mathematical model for the pricing of emissions permits. The model has particular applicability to the European Union Emissions Trading System (EU ETS) but could also be used to consider the modeling of other cap-and-trade schemes. As a response to the risk of Climate Change, carbon markets are currently being implemented in regions worldwide and already represent more than $30 billion. However, scientific, and particularly mathematical, studies of these carbon markets are needed in order to expose their advantages and shortcomings, as well as allow their most efficient implementation.
This Brief reviews mathematical properties such as the existence and uniqueness of solutions for the pricing problem, stability of solutions and their behavior. These fit into the theory of fully coupled forward-backward stochastic differential equations (FBSDEs) with irregular coefficients. The authors present a numerical algorithm to compute the solution to these non-standard FBSDEs. They also carry out a case study of the UK energy market. This involves estimating the parameters to be used in the model using historical data and then solving a pricing problem using the aforementioned numerical algorithm.
The Brief is of interest to researchers in stochastic processes and their applications, and environmental and energy economics. Most sections are also accessible to practitioners in the energy sector and climate change policy-makers.
Authors and Affiliations
Bibliographic Information
Book Title: A Forward-Backward SDEs Approach to Pricing in Carbon Markets
Authors: Jean-François Chassagneux, Hinesh Chotai, Mirabelle Muûls
Series Title: Mathematics of Planet Earth
DOI: https://doi.org/10.1007/978-3-319-63115-8
Publisher: Springer Cham
eBook Packages: Mathematics and Statistics, Mathematics and Statistics (R0)
Copyright Information: The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2017
Softcover ISBN: 978-3-319-63114-1Published: 14 October 2017
eBook ISBN: 978-3-319-63115-8Published: 05 October 2017
Series ISSN: 2524-4264
Series E-ISSN: 2524-4272
Edition Number: 1
Number of Pages: VI, 104
Number of Illustrations: 6 b/w illustrations, 29 illustrations in colour
Topics: Probability Theory and Stochastic Processes, Mathematical Modeling and Industrial Mathematics, Energy Policy, Economics and Management, Quantitative Finance, Energy Policy, Economics and Management, Statistics for Business, Management, Economics, Finance, Insurance