THE RISK MEASUREMENT OF CHINA'S CARBON FINANCIAL MARKET: BASED ON GARCH AND VAR MODEL

By studying five carbon emission exchanges (Beijing, Shanghai, Shenzhen, Guangdong, and Hubei) within China, this study uses the GARCH model to explore the price volatility characteristics of regional carbon trading markets and measures the trading market risks based on VaR model. The results show that the adopted GARCH (1,1) risk model fits well with the characteristics of returns. Besides, fluctuation shock varies among different exchanges, and the volatility of carbon price is influenced more by the heterogeneity of the external environment of the carbon market than the role of internal market mechanisms. The value-at-risk varies between exchanges. These findings pose more challenges to the risk monitoring of carbon finance markets. Therefore, the current work attempts to recommend the establishment of a unified national carbon trading market to control risks and maintain stable market development.