Page 116 - Research on Financial Development Mechanism and Path of Forestry Carbon Sequestration in Developing Countries under Double Carbon Targets

Research on Financial Development Mechanism and Path of Forestry Carbon
Sequestration in Developing Countries under Double Carbon Targets

transaction. Due to the openness and flexibility of the futures market, not only institu-
tional investors, but also small enterprises and individual investors can participate in
carbon sequestration transactions. This diversified participation has not only promoted
the liquidity of the market, but also brought more abundant information and views for
the forest carbon sequestration transaction.
2) the innovative practice of the option market
The innovative practice of the option market is an important part of the forest car-
bon sink derivatives trading cases. In this field, the innovative practice of the option
market is mainly embodied in two aspects: one is the design of the option contract, and
the other is the mechanism of the option transaction. First of all, the design of the op-
tion contract refers to the provisions on the exercise price, exercise time and exercise
method of the option. In the case of forestry carbon sequestration derivatives trading,
the design of option contracts needs to take into account the characteristics of carbon
sinks and the characteristics of forestry carbon sequestration projects. For example,
the price of carbon sinks fluctuates greatly, so the exercise price of the option contract
needs to have a certain degree of volatility to adapt to changes in the market. In addi-
tion, the period of forestry carbon sink project is long, so the exercise time of option
contract needs to take into account the project period, so that investors can exercise the
option at an appropriate time. In addition, the exercise method of the option contract
also needs to take into account the characteristics of forestry carbon sink projects, for
example, cash settlement can be adopted to reduce the cost of physical delivery. Sec-
ondly, the mechanism of options trading refers to the rules of options trading methods
and trading rules. In the case of forestry carbon sink derivatives trading, the option
trading mechanism needs to consider the characteristics of carbon sinks and the charac-
teristics of forestry carbon sink projects. For example, intra-market transactions can be
adopted to improve the efficiency of transactions. In addition, the rules of options trad-
ing also need to take into account the characteristics of carbon sinks. For example, limit
trading can be adopted to reduce the risk of trading. To sum up, the innovative practice
of the options market is an important part of the forest carbon sink derivatives trading
cases, which needs to consider the characteristics of carbon sinks and the characteris-
tics of forest carbon sink projects.

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