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RIN Market: price behavior and its forecast

Kakorina, Ekaterina (2014): RIN Market: price behavior and its forecast.

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Abstract

In the 90th the Kyoto Protocol was signed and a market for emissions emerged. This market has one problem: it is too difficult to measure how much the company is polluting. The USA solved this problem by creating a similar market, namely the RIN (Renewable Identification Number) market. Unlike emissions, presently RINs are traded without the exchange. The importance of the RIN trading is likely to increase in the future and the goal of this paper is to research the RIN price behavior and to forecast the prices using ARMA-t-GARCH models. This paper shows that it is not important how to estimate these series (separately or together), because the estimation of parameters are very similar and the forecasted gaps are similar too. Also the common estimation using DCC-GARCH model made it possible to ascertain that these series have positive correlation in each pair.

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