Project CEMAPRE internal
| Title | PRISEMA - Pricing of Financial Instruments in Emission Markets |
| Participants | Gonçalo Fonseca, Maria do Rosário Grossinho, João Guerra (Principal Investigator), João Janela, Phuong Nguyen, Beatriz Santos |
| Summary | This is a bilateral German-Portuguese Project Pricing of Financial Instruments in Emission Markets, financed by FCT and DAAD (05/2024-04/2026), with a team of researchers from ISEG and a team of researchers from the University of Wuppertal (Germany). The goal of this project is to develop some models for the pricing of financial instruments in the emissions markets. We will focus on structural models based on the underlying economic factors that determine the price of carbon certificates. Our goal is to derive forward-backward stochastic differential equations (FBSDEs) for the allowance pricing process and numerically solve the orse FBSDES associated partial differential equations (PDEs). From a theoretical point of view, we will study the well-posedness of the FBSDEs and the properties of the solutions of the PDEs in some asymptotic cases. We will also develop efficient numerical methods for solving the pricing PDEs, testing methods such as semi-Lagrangian schemes, Lagrangian-Galerkin methods, alternating directions (ADI) finite difference schemes or other suitable methods. |