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.
- CO emission allowances
- Liquidity ‘heat’ measure
ASJC Scopus subject areas
- Economics and Econometrics
Kalaitzoglou, I. A., & Ibrahim, B. M. (2020). OTC Trades and Liquidity in the European Carbon Market: More than meets the eye. Applied Economics, 52(16), 1745-1762. https://doi.org/10.1080/00036846.2019.1678729