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Carbon Tail Risk
- Source :
- The Review of Financial Studies. 34:1540-1571
- Publication Year :
- 2020
- Publisher :
- Oxford University Press (OUP), 2020.
-
Abstract
- Strong regulatory actions are needed to combat climate change, but climate policy uncertainty makes it difficult for investors to quantify the impact of future climate regulation. We show that such uncertainty is priced in the option market. The cost of option protection against downside tail risks is larger for firms with more carbon-intense business models. For carbon-intense firms, the cost of protection against downside tail risk is magnified at times when the public’s attention to climate change spikes, and it decreased after the election of climate change skeptic President Trump.
- Subjects :
- 1402 Accounting
History
Economics and Econometrics
Polymers and Plastics
Natural resource economics
Climate risk
Climate change
2002 Economics and Econometrics
Climate Finance
Future climate
Business model
Climate policy
10003 Department of Banking and Finance
Industrial and Manufacturing Engineering
330 Economics
2003 Finance
Accounting
Option market
Economics
Tail risk
Business and International Management
Finance
Subjects
Details
- ISSN :
- 14657368 and 08939454
- Volume :
- 34
- Database :
- OpenAIRE
- Journal :
- The Review of Financial Studies
- Accession number :
- edsair.doi.dedup.....19e8e8ed071bb6ce8f886c542bb31a8b