EmissionAssetClass
Table2: ResultsofEconometricAnalysisMarch2008toMarch2009
DailyChange
DailyChange ThreeMonth DowJones DBR4.25% DBR4% DBR4.75%
EURIBOR Eurostoxx50
®
DAX
®
2014 2018 2034
EUAsDec09* 0.01 0.01 0.01 0.08 0.08 0.04
CERsDec09* 0.00 0.06 0.05 0.05 0.08 0.03
*ValueofR
2
,‘goodnessoffit’statisticbetweenthetwovariables.Aclosestatisticalrelationshipbetweentwovariableshasa
R
2
higherthan0.7,lowvaluesof0.01/0.09showverylittle/nocorrelation.
settlement) and the (daily) change versus the following fullyinvestedintheDowJonesEUROSTOXX50
®
Index.In Do
financialinstruments: Carbon Permits Constitute a Respectable Asset Class? Hervé-
•
Three-MonthEURIBORrate Mignucci and Keppler analysed the CO
2
emissions market to
•
DowJonesEUROSTOXX50
®
Index othermarketsintermsof:
•
DAX
®
•
Sophisticationofcarbonexchanges
•
DBR4.25%2014(Euro-BoblFuturedeliverablebond)
•
Volatility
•
DBR4.0%2018(Euro-BundFuturedeliverablebond)
•
Informationefficiency
•
DBR4.75%2034(Euro-Buxl
®
Futuredeliverablebond)
•
Liquidity
Theresultsoftheanalysis(Table2)clearlyshowthatthereis
•
Transactioncosts
little correlation between the traditional asset classes of
•
Arbitrageopportunities
European government bonds and European equities to that of
•
Assetpricing
6
EUAsandCERs.ThevalueoftheR
2
‘goodnessoffit’statisticin ... and, based on this criteria, concluded that the emissions
alltheanalysescarriedoutbetweenthe(daily)changeinEUAs marketwerea bone fide assetclass.
and CERs and the traditional asset classes of bonds and
equities shows that no significant correlation exists between Also,muchliketherelationshipthatexistsincashfinancial
these asset classes. This is underlined by looking at a scatter markets and their corresponding financial derivatives, Uhrig-
diagram(Figure 4) of one of the twovariablesunder analysis; HomburgandWagnerinFutures Price Dynamics of CO
2
Emission
the (daily) change in CERs compared to the (daily) change in Certificates – An Empirical Analysis found that futures lead the
theDowJonesEUROSTOXX50
®
Index. pricediscoveryprocessofCO
2
emissioncertificates.
The benefit of incorporating a non-correlated asset like
CO
2
emissions into a traditional asset class of bonds or ProductApplications
equities can be simply shown by analysing the returns of an EEX/Eurex CO
2
derivatives offer investors numerous trading
equity portfolio represented by the Dow Jones EURO STOXX opportunities to pursue investment strategies. The following
50
®
Index and comparing the returns of a combined sectionoutlinesvariousproductapplicationstomeetindividual
equity/CO
2
emissionsportfolioin,forexample,a80:20ratio requirementsoftraditionalandalternativemoneymanagers.
(rebalanced weekly).
Thereturnscomparison(Figure5)clearlyshowsthebenefits CO
2
Derivatives&PortfolioOverlay–
of incorporating CO
2
as a non-correlated asset to an equity IncreasingFlexibility
portfolio with the combined 80%/20% Dow Jones EURO The introduction of CO
2
derivatives to Eurex’s existing suite
STOXX 50
®
Index/CER portfolio outperforming the portfolio of European benchmark exchange-traded derivative products
increases the fund manager’s possibilities
Figure4: Correlation–CERs&DowJonesEUROSTOXX50
®
Index
in assisting changes in portfolio asset
allocation efficiently and quickly whilst
leavingtheexistingportfoliointact.
7
For example, a European pension fund
m
€
anager decides to switch 10% of their
100 million European equity holdings
into a CO
2
emissions exposure. The
European pension fund equity holding
has a 1.23 beta to the Dow Jones EURO
STOXX50
®
IndexFuture.
Thestepsinaportfoliooverlaystrategy
to switch parts of an investment in
EuropeanequitiestoCO
2
emissionsareas
Source: Eurex
follows:
108 worldPower2009
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