Tail Dependence in EU Carbon Markets: Graphical Models of Extremes for EUA Futures (opens in new tab)

Understanding how extreme price movements propagate across financial and energy markets is critical for risk management and regulatory design in the EU Emissions Trading System (EU ETS). We apply H\"{u}sler-Reiss graphical models of extremes to a system of 20 daily variables centred on EU allowances futures across Phases 3 and 4 of the EU ETS (2013--2025), with a Gaussian graphical model as the average-dependence baseline. The tail networks are ...