Dealing with a new topic around the climate change finance, we present the carbon market and its mechanism, focussing on the link between the EUA and the CER markets as well as explaining the challenges of carbon regulation and the economy of primary and secondary CERs. Assuming polluting...

Due to extreme volatility in the prices of CO2 permits observed in the European markets, effective hedging techniques such as futures contracts and option instruments rapidly developed, together with approximations to the dynamics of the underlying. To bridge the gap between theory and practice,...