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<DIV dir=ltr><FONT face=Arial color=#000000 size=2><FONT size=2><FONT face="Times New Roman" size=3>Dear Readers,</FONT></FONT></FONT></DIV></DIV>
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<DIV dir=ltr><FONT face=Arial color=#000000 size=2><FONT size=2><FONT face="Times New Roman" size=3>we have recently posted a paper on emission allowance price formation in the EU ETS. P</FONT><FONT face="Times New Roman" size=3>lease, feel free to download it and/or distribute this link to interested persons.</FONT></DIV></DIV>
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<P><FONT face="Times New Roman" size=3>Title: The Endogenous Price Dynamics of the Emission Allowances: An Application to CO2 Option Pricing.</FONT></P>
<P><FONT face="Times New Roman" size=3>Abstract: </FONT></P>
<P><FONT face="Times New Roman" size=3>Market mechanisms are increasingly being used as a tool for allocating somewhat scarce but unpriced rights and resources, such as air and water. Tradable permits have emerged as the most cost-effective measure leading to the emergence of both nationwide (SO2) and supranational(CO2)emission permits markets. By means of the dynamic optimization of companies which are covered by such environmental regulations, we develop an endogenous model for the emission permit spot price dynamics that accounts also for the presence of asymmetric information. In the model, the companies are characterized by exogenous pollution processes that, in the short term, is the underlying of the permit price dynamics. An extensive numerical exercise is carried out for the CO2 permit price in the European market. We introduce for the first-time in actual literature a CO2 option pricing model comparison. The option pricing method can be used for hedging purposes and for pricing CO2-linked projects and investments. </FONT></P>
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<P><FONT face="Times New Roman" size=3>Keywords: Asymmetric Information, Emission Allowances, Endogenous Price Dynamics, Environmental Finance </FONT></P>
<P><FONT face="Times New Roman" size=3>Link to download the paper</FONT>: </FONT><A href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1090150"><U><FONT color=#0000ff size=2>http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1090150</U></FONT></A></P><FONT size=2>
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<P><FONT face="Times New Roman" size=3>Luca Taschini</FONT></P>
<P><FONT face="Times New Roman" size=3>University of Zürich</FONT></P>
<P><FONT face="Times New Roman" size=3>Plattenstrasse 32 CH - 8032 Zürich</FONT></P>
<P></FONT><FONT face="Times New Roman" size=3>My papers are available on SSRN at: </FONT><A href="http://ssrn.com/author=605723"><U><FONT color=#0000ff><FONT face="Times New Roman" size=3>http://ssrn.com/author=605723</FONT></U></FONT></A><FONT face="Times New Roman" size=3> </FONT></P>
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<P><FONT face="Times New Roman" size=3>***</FONT></P>
<P><FONT face="Times New Roman" size=3>"Before printing please think about the ENVIRONMENT !"</FONT></P>
<P><FONT face="Times New Roman" size=3>***</FONT></P></FONT><FONT face=Arial color=#000000 size=2></DIV></DIV></FONT></DIV></DIV></BODY></HTML>