We provide a valuation formula for emission allowance. Assuming that the value of emission allowance on the last day of a trading phase is equal to a spread of commodity prices (e.g. electricity and natural gas) when the spread is positive and less than the penalty, we show that the emission...

The objective of this study is to analyse the theoretical pricing of wind power derivatives, which is important for renewable energy risk management but has a problem in the pricing due to the illiquidity of the assets and to show the application of the theory to the practical implementation of...