# Modeling Volatility and Dependence of European Carbon and Energy Prices

arXiv: https://arxiv.org/abs/2208.14311 · HTML: https://mlsanity.com/paper/2208.14311/

## Key facts

- No citing papers in the map yet (data through 14 Oct 2026).
- Builds on 0 of its 28 references that are in the map.
- First posted on arXiv 30 Aug 2022.

## Abstract (arXiv)

We study the prices of European Emission Allowances (EUA), whereby we analyze their uncertainty and dependencies on related energy prices (natural gas, coal, and oil). We propose a probabilistic multivariate conditional time series model with a VECM-Copula-GARCH structure which exploits key characteristics of the data. Data are normalized with respect to inflation and carbon emissions to allow for proper cross-series evaluation. The forecasting performance is evaluated in an extensive rolling-window forecasting study, covering eight years out-of-sample. We discuss our findings for both levels- and log-transformed data, focusing on time-varying correlations, and in view of the Russian invasion of Ukraine.