Options introduction and volatility in the EU ETS.(Report) Chevallier, Julien; Le Pen, Yannick; Sévi, Benoît

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Chevallier, Julien ; Le Pen, Yannick ; Sévi, Benoît
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Resource and Energy Economics
option prices; volatility; Petroleum, energy and mining industries
To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.reseneeco.2011.07.002 Byline: Julien Chevallier (a), Yannick Le Pen (a), BenoA[R]t Sevi (b) Abstract: a* The first study to assess the impact of derivatives introduction on the volatility of the underlying EU ETS futures contract. a* Results show a significant decrease in volatility after the introduction of options. a* Robustness checks about the methodology, the proxies or the relevant date for introduction confirm the empirical findings. Author Affiliation: (a) Universite Paris Dauphine (CGEMP/LEDa), Place du Marechal de Lattre de Tassigny, 75775 Paris Cedex 16, France (b) Universite de la Mediterranee Aix-Marseille II (DEFI), ChAcentsteau La Farge - Route desMilles, 13290 Les Milles Aix-en-Provence, France Article History: Received 28 October 2009; Revised 15 June 2011; Accepted 12 July 2011 Article Note: (footnote) [star] The authors are particularly grateful for the constructive and helpful comments received from the Editor Jason Shogren. Together with the detailed remarks of one anonymous reviewer, they helped us to improve the article significantly. The authors wish to thank the Conseil Francais de l'Energie and the Europlace Institute of Finance for their financial support. Helpful comments were also received from seminar participants at the 32nd IAEE conference (San Francisco, 2009), the 17th EAERE annual meeting (Amsterdam, 2009), Stirling University, Paris Dauphine University, and the London Energy Forum 2009. Last but not least, we warmly thank Derek Bunn for his insightful comments on earlier drafts of this article, and Stewart Mayhew for his advice on the issue of derivatives introduction. All remaining errors are ours.
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