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1 Audencia Recherche 2 Heriot-Watt University

Abstract : We investigate whether liquidity introduces or helps resolve uncertainty in Phase I and the first year of Phase II of the European carbon futures market. We propose a distinction between ‘absolute’ or overall liquidity and that which is ‘relative’ to a benchmark. For this purpose, we suggest volume-weighted duration as a natural measure of trading intensity as a proxy for liquidity, and we model it as a rescaled temporal point process. The new model is called Autoregressive Conditional Weighted Duration ACWD and is shown to outperform its discrete modelling counterparts. Liquidity is found to play a dual role, with higher relative liquidity introducing uncertainty and higher absolute liquidity accelerating uncertainty resolution, thus, enhancing market efficiency.

Keywords : Carbon market Temporal marked point process Marked duration Instantaneous liquidity





Autor: Iordanis Angelos Kalaitzoglou - Boulis Maher Ibrahim -

Fuente: https://hal.archives-ouvertes.fr/



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