This paper presents valuation models of emission allowance options under an emission trading scheme, operating in an open trading phase, where unused allowances are banked to subsequent phases without any limit. Empirical studies are carried out to show that allowance option prices exhibit...

This paper provides a complete-market valuation framework for emission allowances and related derivatives. In particular we present a structural model by assuming an emission rate with time-homogeneous parameters, where closed-form expressions are derived for allowances, allowance futures, and...