期刊
ANNALS OF APPLIED PROBABILITY
卷 23, 期 3, 页码 1086-1128出版社
INST MATHEMATICAL STATISTICS
DOI: 10.1214/12-AAP865
关键词
Stochastic analysis; forward-backward stochastic differential equations; emissions derivatives
资金
- NSF [DMS-08-06591]
- Chair Financial Risks of the Risk Foundation
- Societe Generale
- Federation Bancaire Francaise
- EDF
- CA-CIB
- Division Of Mathematical Sciences
- Direct For Mathematical & Physical Scien [1211928] Funding Source: National Science Foundation
We introduce two simple models of forward-backward stochastic differential equations with a singular terminal condition and we explain how and why they appear naturally as models for the valuation of CO2 emission allowances. Single phase cap-and-trade schemes lead readily to terminal conditions given by indicator functions of the forward component, and using fine partial differential equations estimates, we show that the existence theory of these equations, as well as the properties of the candidates for solution, depend strongly upon the characteristics of the forward dynamics. Finally, we give a first order Taylor expansion and show how to numerically calibrate some of these models for the purpose of CO2 option pricing.
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