6533b86dfe1ef96bd12cabc0

RESEARCH PRODUCT

The inconvenience yield of carbon futures

Angel PardoFernando Palao

subject

Convenience yieldcarbon futuresEconomics and EconometricsExploitYield (finance)Financial marketiceContangoUNESCO::CIENCIAS ECONÓMICASMonetary economicsconvenience yield:CIENCIAS ECONÓMICAS [UNESCO]contangoGeneral EnergyEconomicsFinancializationArbitrageFutures contract

description

Abstract Since 2009, the European Carbon Futures Market has been in a permanent contango situation that is characterised by systematic negative convenience yields that allow investors to exploit profitable arbitrage opportunities. The objective of this paper is to analyse the possible drivers of these negative convenience yields. Our empirical results indicate that although some carbon trading variables are behind this contango situation, the carbon inconvenience yield is better explained if other financial markets and variables are considered, suggesting a financialization of the European Carbon Futures Market.

yearjournalcountryeditionlanguage
2021-09-01
10.1016/j.eneco.2021.105461https://hdl.handle.net/10550/82067