Purpose: In asset management, what if clients want to purchase protection from risk factors, under the form of variance risk premia. This paper aims to address this topic by developing a portfolio optimization framework based on the criterion of the minimum variance risk premium (VRP) for any...

The aim of this research was to examine the structural changes of European carbon futures price under the European Union Emissions Trading Scheme during 2005-2012. More specifically, by relying on the daily EU allowance futures contract, we investigate the structural changes of the European...

Mastering the underlying characteristics of carbon price changes can help governments formulate correct policies to keep efficient operation of carbon markets, and investors take effective measures to evade their investment risks. Empirical mode decomposition (EMD), a self-adaption data analysis...

This article adopts the asymmetric DCC with one exogenous variable (ADCCX) model developed by Vargas (2008), by updating the concept of ‘volatility surprise’ to capture cross-market relationships. Current methods for measuring spillovers do not focus on volatility interactions, and neglect...

To assess how financial markets and commodities are inter-related, this paper introduces a ‘volatility surprise’ component into the asymmetric DCC with one exogenous variable (ADCCX) framework. We develop an econometric model in which returns and volatility allow to influence pairs of...