Price Characteristic And Risk Management On Carbon Financial Products

As an emerging financial product, carbon financial products are the power to build and impr ove the backbone of carbon market financial products and also the basic tools of the carbon f inancial products trading market. Price is the core part of the trading of carbon financial prod ucts, in terms of both of its informational role of price or the income impact of market partici pants.The specialty of the price of carbon financial products is because of its nature as being based onemissions of underlying commodity. Analyzing from the point of view of market participa nts, the carbon financial product prices are affected mainly by the policy, the supply quota an d demand factors. These elements’ complex and burdensome impact mechanism makes carb on financial products showing lots of their specialty, including jumping, unstationarity, price variability and distribution of non-normality. These features touch the limitations of tradition al financial products pricing models and risk estimation models and need to use extended mo del to solve the problems of such products. This includes comparing the traditional Black-Scholes option pricing methods to the expected results of the simulation of the Monte Carlo option prices, leading to the latter is more applicable; comparing traditional VaR risk measur ement models and finding that the C-VaR model is more appropriate for risk measure of carb on financial products.In addition, frequent fluctuations in price performance also call for the urgent needs of carbo n financialproducts risk management. With the varieties of carbon financial products and stro ng relevance with both ecological and economic products, diversified strategy carbon financi al products investment is a better choice for the investors to avoid risk.