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Citations since 2017
3 Research Items
We study the effect of investment horizon on the optimal stock–bond–cash portfolio in a dynamic model with uncertainty about climate change. The stock risk premium is assumed to be an affine function of the average global temperature and an unobserved factor which is estimated via Bayesian learning. We assume that the probability distribution of fu...
The climate change model of Daniel et al. (Proc Natl Acad Sci USA 116(42):20886-20891, 2019. https://doi.org/10.1073/pnas.1817444116) is an important contribution to the carbon pricing literature. However, the computational methodology proposed in this paper is costly, thus limiting the flexibility and scalability of this basic approach. In this pa...
In this manuscript, we examine the welfare benefits of climate risk hedges and the effects of climate uncertainty on optional portfolios with different investment horizons. We consider the case when an investor who trades in a stock market also holds a claim that pays off when an adverse climate scenario materializes. The optimal investoment strate...
The problem of optimal portfolio choice is solved, in closed form, for an ambiguity averse investor who has access to stock and derivatives markets. The investor can have different levels of uncertainty about models for stock return and its stochastic volatility. Although both types of ambiguity considerably impact the optimal portfolio, we show th...