| Abstract: |
This paper presents an introductory analysis of price formation and volatility
in the European Union Emissions Trading Scheme using highfrequency data. The
results show that there are several anomalies both in the EUA spot and EUA
futures market. First, price formation seems to take place on price sets that
are coarser than those offered by the exchanges. Second, price formation in
the EUA spot market (BlueNext) may be strongly affected by the price formation
in the EUA futures market (ICE Futures). The typical U-shaped pattern of
intraday volatility, that is often observed in organized financial markets, is
partly present in the EUA futures market. Similar to other classical financial
markets, realized volatility estimates of daily EUA volatility seem to have a
long-memory property. |