Liquidity and transaction costs in the European carbon futures market

Alex Frino, Jennifer Kruk, Andrew Lepone*

*Corresponding author for this work

Research output: Contribution to journalArticle

15 Citations (Scopus)

Abstract

This article is the first to examine liquidity and transaction costs in the European carbon futures market. Results indica te a dramatic improvement in liquidity and a subsequent reduction in transaction costs since carbon futures began trading in 2005. On-market liquidity gravitates to December expiry month contracts, coinciding with annual emissions audit requirements. Results also document a widening of the bid-ask spread in response to information asymmetry, and provide evidence of a permanent price effect following medium and large trades.

Original languageEnglish
Pages (from-to)100-115
Number of pages16
JournalJournal of Derivatives and Hedge Funds
Volume16
Issue number2
DOIs
Publication statusPublished - Aug 2010
Externally publishedYes

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