Buch, Englisch, 75 Seiten
Buch, Englisch, 75 Seiten
Reihe: Elements in Quantitative Finance
ISBN: 978-1-047-77785-8
Verlag: Cambridge University Press
This Element explains the architecture of current climate scenarios and discusses whether it is well-suited to the needs of financial analysts and investment professionals. The author argues that prevailing models underrepresent the uncertainty surrounding climate outcomes. He shows that current scenarios architecture mechanically produces a negative climate risk premium, but that this result only obtains under very special circumstances. He quantifies the economic impact of a misspecification of the sign of the climate risk premium, finding that it is large. The current scenario architecture also unwarrantedly emphasizes transition risk over the potentially more severe physical risks, leading to a skewed picture of climate related financial exposure. The lack of probabilistic weighting in scenario design undermines their usefulness for asset valuation and risk assessment. The Element suggests how a new generation of climate scenarios for investors should be structured, emphasizing transparency, sensitivity analysis, and a more balanced representation of possible outcomes.
Autoren/Hrsg.
Weitere Infos & Material
1. Introduction; 2. The Architecture of the IPCC Climate Scenarios; 3. The NGFS Scenarios; 4. Probabilities for Climate Scenarios; 5. The Degree of Uncertainty in Climate Scenarios; 6. Conclusions.
