OTC Trades and Liquidity in the European Carbon Market: More than meets the eye

Iordanis Angelos Kalaitzoglou, Boulis Maher Ibrahim

Research output: Contribution to journalArticle

Abstract

This study investigates whether the previously reported price impact of OTC trades in the EU ETS can be attributed to their distinctively larger size (liquidity related) or to their discretionary feature (information related). The findings suggest that OTC trades induce volatility shocks that are higher in magnitude and faster resolved than those of solely high trading-intensity trades, which appears to be driven mainly by their presence, rather than by their size. An analysis of intraday price premia reveals that they are strategically placed by interacting with the organized market whenever their price and volatility impact is lower.
Original languageEnglish
Pages (from-to)1745-1762
Number of pages18
JournalApplied Economics
Volume52
Issue number16
Early online date17 Oct 2019
DOIs
Publication statusPublished - 2 Apr 2020

Keywords

  • CO emission allowances
  • Liquidity ‘heat’ measure
  • OTC

ASJC Scopus subject areas

  • Economics and Econometrics

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