Carbon Tail Risk
Copyright policy )Carbon Tail Risk
AbstractStrong 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.
- National University of Singapore Singapore
- European Corporate Governance Institute Belgium
- University of Zurich Switzerland
- Frankfurt School of Finance & Management Germany
1402 Accounting, Economics and Econometrics, 2003 Finance, Accounting, 10003 Department of Finance, 2002 Economics and Econometrics, Finance, 330 Economics
1402 Accounting, Economics and Econometrics, 2003 Finance, Accounting, 10003 Department of Finance, 2002 Economics and Econometrics, Finance, 330 Economics
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