6533b85ffe1ef96bd12c2842
RESEARCH PRODUCT
Rolling Over EUAs and CERs
Oscar CarchanoVicente MedinaAngel Pardosubject
Rollover date futures contracts European Union Allowances Certified Emission ReductionsActuarial scienceRollover (finance)Maturity (finance)Market liquidityOddsDerivative (finance)Order (exchange)EconometricsEconomicsmedia_common.cataloged_instanceEuropean unionFutures contractmedia_commondescription
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.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2012-05-01 | SSRN Electronic Journal |