Research Of Diversifying CER Price Risk With The “Insurance Plus Futures” Mode

In order to improve the environment,China has proposed its own major emission reduction targets under the framework of Paris Agreement,and has been actively establishing carbon markets since 2011.On December 19,2017,the National Development and Reform Commission announced the official launch of the unified carbon market covering the whole country,which marks a new stage of carbon emissions trading in China.According to the plan of the national unified carbon emission trading system,carbon derivatives are expected to be launched between 2018-2020.In derivatives,insurance and options both have the function of risk redistribution,which helps companies to avoid carbon trading price risks.Therefore,thi s paper hopes to build a cooperation model between insurance companies and futures companies to diversify the price risk of carbon market by using the advantages of both sides.This paper first analyzes the operational mechanism and development status of eight carbon trading markets through data collection and data compilation of eight pilot carbon markets,and compares the price fluctuation characteristics of each market.Then,we design a specific mechanism of the “insurance plus futures” mode and analyze the income and motivation of the participants relevant.In addition,in order to test the feasibility of the “insurance plus futures” mode,this paper takes an example to simulate the performance of the three-month carbon option and carbon insurance products on March 1,2016.The results show that the company has used the premium of less than 200 yuan to avoid the loss of 10,000 yuan,so the risk aversion effect is good.Finally,this paper gives reasonable suggestions for the problems that the “insurance + futures” mode may encounter in practical use.This paper applies the “insurance plus futures” mode of agricultural price insurance to the field of carbon finance,and provides solutions for the key problem of huge claims in carbon insurance.It enriches the concept of carbon insurance for domestic scholars and provides new ideas for the design of carbon derivatives and a viable safe haven for companies included in the emission reduction system.