We investigate whether liquidity introduces or helps resolve uncertainty in Phase I and the first year of Phase II of the European Carbon futures market. We propose a distinction between ‘absolute' or overall liquidity and that which is ‘relative' to a benchmark. For this purpose, we suggest...

This paper develops an order type-selection trading rule based solely on transaction data, assuming that limit orders require adequate monetary reward for risk exposure. Their suitability is found to depend on the sensitivity of price components to expected market conditions. Limit orders should...