## Abstract

In the current context of global warming, the prediction of carbon prices has acquired a prominent

role since carbon price constitutes a powerful tool in the operation of artificial carbon markets and

the design of mechanisms oriented to mitigate climate change. A major challenge for carbon price

forecasting is the modeling of non-linear effects in the time series, for which the use of hybrid

models seems to be an appealing alternative to explore. This paper studies the performance of a

hybrid model which weights the results from the exponential smoothing model, nonlinear

autoregressive neural network, and the autoregressive integrated moving average model. These

weights are determined by (i) assuming equal weights, (ii) cross validated errors, and (iii) using a

neural network to optimize the individual weights. The results confirm the importance of

modeling the non-linear effects of time series and the capacity of hybrid models in predicting

carbon prices.

Page

role since carbon price constitutes a powerful tool in the operation of artificial carbon markets and

the design of mechanisms oriented to mitigate climate change. A major challenge for carbon price

forecasting is the modeling of non-linear effects in the time series, for which the use of hybrid

models seems to be an appealing alternative to explore. This paper studies the performance of a

hybrid model which weights the results from the exponential smoothing model, nonlinear

autoregressive neural network, and the autoregressive integrated moving average model. These

weights are determined by (i) assuming equal weights, (ii) cross validated errors, and (iii) using a

neural network to optimize the individual weights. The results confirm the importance of

modeling the non-linear effects of time series and the capacity of hybrid models in predicting

carbon prices.

Page

Original language | Spanish (Colombia) |
---|---|

Title of host publication | Carbon price returns prediction using a hybrid model |

Publisher | World finance and banking symposium |

Pages | 67-67 |

Number of pages | 1 |

ISBN (Print) | 978-989-54931-3-5 |

State | Published - Dec 17 2021 |