Project CEMAPRE internal
| Title | Pricing of Financial Instruments in Emission Markets - PRISEMA |
| Participants | João M D'Água, Maria do Rosário Grossinho, Manuel Guerra, João Guerra (Principal Investigator), João Janela, Vasco C Tavares |
| Summary | The aim of this project is to propose stochastic structural models for the risk-neutral pricing of carbon emission certificates and develop numerical methods for pricing financial instruments in emission markets. More precisely, for the different structural models proposed, the main goals are to obtain the corresponding forward-backward stochastic differential equations (FBSDE) for the price process of the certificates and to solve numerically the associated PDE's for the certificate price and for the prices of financial derivatives in the emissions market. In this framework, the structural model for emission certificates depends on a stochastic process modelling the electricity demand and the emission certificates are considered as financial derivatives depending on the demand process and the emissions process. The project will continue to reinforce the collaboration with the research team at Wuppertal University, Germany, coordinated by Prof. Matthias Ehrhrardt, progressing the previous work with special emphasis on qualification of young academics in an international environment. Special support will be given to the MSc students Vasco Tavares and João D'Água. Complementary funding from the Germany-Portugal Bilateral project PRISEMA - Pricing of Financial Instruments in Emission Markets, can be obtained, if this project (which was submitted to FCT in September of 2022) is approved for funding by FCT/DAAD. |