The Valuation of Carbon Bonds Linked with Carbon Price
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Shuhua Zhang
Abstract
The carbon bonds issued by countries or enterprises can solve the problem of funds in low carbon economy growth. Now most of carbon bonds pay fixed interest rates, and a few pay floating rates. The diversity of carbon bonds can attract more investors to participate green energy projects. The London Accord project group proposed the index linked carbon bonds in the World Band Government Borrowers' Forum in May 2009, and pointed out that the interest paid regularly may be linked to carbon price, governments' carbon emission targets, in-country fossil fuel prices or tariff feed-in prices. In this paper, the interests are considered to be linked with carbon prices in the condition of stochastic risk-free interest rate, and a partial differential equation is established for carbon bond interests. Also, a fitted finite volume method is employed to solve the resulting partial differential equation numerically, and on the basis of the valuation for zero-coupon bonds, the price of carbon bonds is obtained. Finally, some data are utilized for the calibration of the parameters in the established pricing models, and some numerical examples are presented and the effects of parameters on solutions are also demonstrated, which can provide references for the issuers of carbon bonds.
Funding source: National Basic Research Program
Award Identifier / Grant number: 2012CB955804
Funding source: National Natural Science Foundation of China
Award Identifier / Grant number: 11171251, Major Research Plan 91430108
Funding source: Tianjin University of Finance and Economics
Award Identifier / Grant number: Major Program ZD1302
Funding source: Youth Science Research Foundation of Tianjin University of Commerce
Award Identifier / Grant number: 14QNJJ10
© 2016 by De Gruyter
Artikel in diesem Heft
- Frontmatter
- Vertex-Based Compatible Discrete Operator Schemes on Polyhedral Meshes for Advection-Diffusion Equations
- Reliable Averaging for the Primal Variable in the Courant FEM and Hierarchical Error Estimators on Red-Refined Meshes
- Monotone Finite Difference Schemes for Quasilinear Parabolic Problems with Mixed Boundary Conditions
- The Laguerre Collocation Method for Third Kind Integral Equations on Unbounded Domains
- Projection Methods for Ill-Posed Problems Revisited
- Explicit Constants in Poincaré-Type Inequalities for Simplicial Domains and Application to A Posteriori Estimates
- Regularization by Aggregation of Global and Local Data on the Sphere
- A Note on Lower Bounds of Eigenvalues of Fourth Order Elliptic Operators on Local Quasi-Uniform Grids
- Numerical Analysis and Computation of a Type of IMEX Method for the Time-Dependent Natural Convection Problem
- The Valuation of Carbon Bonds Linked with Carbon Price
Artikel in diesem Heft
- Frontmatter
- Vertex-Based Compatible Discrete Operator Schemes on Polyhedral Meshes for Advection-Diffusion Equations
- Reliable Averaging for the Primal Variable in the Courant FEM and Hierarchical Error Estimators on Red-Refined Meshes
- Monotone Finite Difference Schemes for Quasilinear Parabolic Problems with Mixed Boundary Conditions
- The Laguerre Collocation Method for Third Kind Integral Equations on Unbounded Domains
- Projection Methods for Ill-Posed Problems Revisited
- Explicit Constants in Poincaré-Type Inequalities for Simplicial Domains and Application to A Posteriori Estimates
- Regularization by Aggregation of Global and Local Data on the Sphere
- A Note on Lower Bounds of Eigenvalues of Fourth Order Elliptic Operators on Local Quasi-Uniform Grids
- Numerical Analysis and Computation of a Type of IMEX Method for the Time-Dependent Natural Convection Problem
- The Valuation of Carbon Bonds Linked with Carbon Price
