An analytical framework to price long-dated climate-exposed assets

• 成果类型: Article
• 署名作者: Chikhani, Pauline; Renne, Jean-Paul
• 署名单位: University of Lausanne
• 刊物名称: QUANTITATIVE ECONOMICS
• ISSN/ISSBN: 1759-7323
• DOI: 10.3982/QE2570
• 发表日期: 2025
• 关键词: social cost; IMPULSE-RESPONSE; affine processes; RUN RISKS; carbon; uncertainty; temperature; MARKET; emissions; POLICY

摘要

This paper uses a tractable stochastic integrated-assessment model to analyze the influence of climate change on asset returns across time and maturity. Quasi-analytical, or recursive, formulas allow to price various long-dated assets, including fixed-income products, derivatives, and equities. We find that climate risks will increasingly drive down long-term risk-free yields, reducing them by about 30 basis points by the end of the century. This decline reflects weaker growth and increased uncertainty, leading to a rise in precautionary savings. We illustrate the concept of climate risk premiums by examining model-implied prices of long-term assets vulnerable to sea level rise or temperatures. Climate risk premiums are particularly sensitive to damage assumptions.