Studies on Asian Carbon Option Pricing Based on GARCH Model and Fractional Brownian Motion

Carbon financial derivatives are essential for the perfection and maturity of the carbon market. However, China's carbon market currently lacks carbon financial derivatives very seriously. In order to provide new ideas for companies that control carbon emissions to avoid risks and to innovate carbon financial derivatives in China's carbon market, this paper designs an Asian carbon option based on carbon emission quotas and formulates its price. Taking the Hubei carbon market as the research object, using the GARCH model to fit the fluctuations of carbon prices; deriving the discrete Asian carbon option price based on the fractional Brownian motion model; further explaining the specific elements of Asian carbon option contract design through specific cases, and calculate the theoretical price of Asian carbon option, provide a scientific and reasonable basis for the decision-making of carbon option for emission control enterprises, and provide products and support for improving China's carbon market construction.