"Unifying risk and regulation" series:
The carbon market: Politics and markets - and how to model it

Held on: Tuesday 11th May 2010

Each quarter FRSGlobal CoR²Experts present the results of ongoing research into the increasing demand for the results of risk management (in particular stress-testing) in reports to the local regulator(s) and the difficulties firms are encountering to meet these new demands.

Willi Brammertz

This month’s topic is "The carbon market: Politics and markets - and how to model it".

In this webinar Dr Willi Brammertz, risk specialist and author of Unified Financial Analysis, explored the C02 politics and markets and looked at the ways in which emissions are going to operate as a financial product.

FRSGlobal has been working with Zurich University to create the world’s first theoretical foundation to gauge fair value pricing of emission-linked derivate contracts. This leading-edge research taps into the newly established global emission markets and will be included in RiskPro during 2010-2011.

The research targets 2 key areas to ensure high-performance and rapid calculation:

  1. the modeling of the martingale dynamics of futures contracts on emission allowances
  2. and the implementation of quasi closed form expressions for European Call Options on emission allowance futures

Thomas Brouwer, Head of Product Management, FRSGlobal, commented: “The emission markets are being established globally and are growing rapidly. The increasing liquidity in trading futures on greenhouse gas emission allowances has led to the trading of emission-linked derivatives. The current problem faced by the industry is that no theoretical foundation for pricing of these contracts is available, and this research and development places FRSGlobal at the forefront of making this a reality.”

The carbon market
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Attendees automatically receive a summary of the webinar, complete with results of on-line polls and questions submitted during the Q&A session, the PowerPoint slides used during the presentation, and a link to a recording of the webinar.

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