Liquidity and resolution of uncertainty in the European carbon futures market

Iordanis Angelos Kalaitzoglou; Boulis Maher Ibrahim

doi:10.1016/j.irfa.2014.11.006

Liquidity and resolution of uncertainty in the European carbon futures market

Iordanis Angelos Kalaitzoglou, Boulis Maher Ibrahim

Research output: Contribution to journal › Article › peer-review

19 Citations (Scopus)

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

Original language	English
Pages (from-to)	89-102
Number of pages	14
Journal	International Review of Financial Analysis
Volume	37
Issue number	1
Early online date	6 Nov 2014
DOIs	https://doi.org/10.1016/j.irfa.2014.11.006
Publication status	Published - Jan 2015

Keywords

instantaneous liquidity;
Marked duration
Temporal marked point process
Carbon market

ASJC Scopus subject areas

Economics, Econometrics and Finance(all)
General Energy

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10.1016/j.irfa.2014.11.006

http://authors.elsevier.com/a/1QCyT3mS~21hXT

Boulis Maher Ibrahim
- B.M.Ibrahimhw.acuk
- School of Social Sciences, Edinburgh Business School - Associate Professor
- School of Social Sciences - Associate Professor
Person: Academic (Research & Teaching)

Cite this

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KW - Temporal marked point process

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ER -

Liquidity and resolution of uncertainty in the European carbon futures market

Abstract

Keywords

ASJC Scopus subject areas

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Boulis Maher Ibrahim

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