Application Of Gamma Distribution In Carbon Market

Due to the massive emission of carbon dioxide,the ecological environment deteriorates sharply.Therefore,many countries begin to establish carbon trading markets to promote carbon emission reduction.At present,the domestic carbon trading has expanded from the pilot to the national unified market,which means that the development of our carbon market will face more challenges and difficulties.Further improving carbon trading mechanism and enriching carbon trading products will effectively enhance the position of our country in carbon trading market,and reasonable pricing of carbon financial derivatives is the basis of launching related financial products.At present,the carbon spot market in our country has tended to mature,so this paper takes carbon option as the object to help improve domestic carbon market.Since the bilateral gamma distribution can highly fit the characteristics of carbon financial series with sharp peaks and thick tails,this paper constructed a fractional BS model based on bilateral gamma distribution and applied it to carbon option pricing.In the empirical analysis,descriptive statistical analysis is first made on the EUA futures price return series,and its distribution is more similar to gamma distribution,which verifies the applicability of the model constructed in this paper for carbon option pricing.Then,the bilateral gamma distribution fitting carbon quotas yield sequence carbon quota price volatility.Finally,this volatility is used to optimize the fractional BS option pricing model and obtain the carbon option price under different strike prices.The EUA futures option pricing experiment shows that the underlying asset price volatility has a great impact on the option price,and the call option price is negatively correlated with the strike price,which is consistent with the actual situation,indicating that this model can be used for carbon option pricing.This model is used to price carbon option with domestic carbon emission quota as the underlying asset,and the result converges gradually with the passage of time,which conforms to the fluctuation law of financial market.Based on the bilateral gamma distribution,this paper simultaneously considers the impact of trading volume and the correlation between rising and falling returns on asset prices,and derives the joint distribution function of rising and falling returns.Based on this,the probability inference of the future price of carbon emission quota is carried out.The results show that the continuous rise and continuous fall of the carbon quota return series will affect each other,and the trading volume has a promoting effect on the return rate.In summary,bilateral gamma distribution can be used to price carbon options and provide theoretical basis for the launch of carbon options products in China.It can also be used to predict the probability of future price rises and falls of carbon quota,which helps investors to judge future price rises and falls and avoid risks.