M. Šmíd, F. Zapletal
Abstract We formulate a Mean-CVaR decision problem of a production company obliged to cover its CO2 emissions by allowances. Certain amount of the allowances is given to the company for free, the missing/redundant ones have to be bought/sold on a market. To manage their risk, the company can use futures and options. We solve the problem for the case of an existing Czech steel company for different levels of risk aversion and different scenarios of the demand. We show that the necessity of emissions trading generally, and the risk caused by the trading in particular, can influence the production significantly even when the risk is decreased by means of derivatives.
Keywords: optimal production, emission trading, mean-CVaR analysis
Scheduled
WC2 Energy markets
June 1, 2016 12:00 PM
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