Related papers: Hedging carbon risk with a network approach
Environmental, Social, and Governance (ESG) data provides non-financial insights into corporations. In this study, we aim to identify relevant ESG raw variables to assess financial risk, measured by logarithmic volatility of return. We…
We investigate the portfolio selection problem against the systemic risk which is measured by CoVaR. We first demonstrate that the systemic risk of pure stock portfolios is essentially uncontrollable due to the contagion effect and the…
This paper investigates strategic investments needed to mitigate transition risks, particularly focusing on sectors significantly impacted by the shift to a low-carbon economy. It emphasizes the importance of tailored sector-specific…
On the way towards carbon neutrality, climate stress testing provides estimates for the physical and transition risks that climate change poses to the economy and the financial system. Missing firm-level CO2 emissions data severely impedes…
Quantitative Investment, built on the solid foundation of robust financial theories, is at the center stage in investment industry today. The essence of quantitative investment is the multi-factor model, which explains the relationship…
Under the global low-carbon target, the uneven spatiotemporal distribution of renewable energy resources exacerbates the uncertainty and seasonal power imbalance. Additionally, the issue of an incomplete hydrogen energy chain is widely…
Sustainability reports are key for evaluating companies' environmental, social and governance, ESG performance, but their content is increasingly obscured by greenwashing - sustainability claims that are misleading, exaggerated, and…
Understanding non-linear relationships among financial instruments has various applications in investment processes ranging from risk management, portfolio construction and trading strategies. Here, we focus on interconnectedness among…
Industrial carbon emissions are a major driver of climate change, yet modeling these emissions is challenging due to multicollinearity among factors and complex interdependencies across sectors and time. We propose a novel graph-based deep…
The energy market, and specifically the renewable sector carries volatility and risks, similar to the financial market. Here, we leverage on a well-established, return-risk approach, commonly used by equity portfolio-managers and apply it…
The debate between active and passive investment strategies has been ongoing for many years and is far from being over. In this paper, we show that the choice of an optimal portfolio management strategy depends on an investment climate,…
Motivated by the asset-liability management of a nuclear power plant operator, we consider the problem of finding the least expensive portfolio, which outperforms a given set of stochastic benchmarks. For a specified loss function, the…
We use supervised learning to identify factors that predict the cross-section of returns and maximum drawdown for stocks in the US equity market. Our data run from January 1970 to December 2019 and our analysis includes ordinary least…
In this study, we propose a new multi-objective portfolio optimization with idiosyncratic and systemic risks for financial networks. The two risks are measured by the idiosyncratic variance and the network clustering coefficient derived…
In this work we propose a framework to construct Market-Implied Sustainability (MIS) scores for individual firms by exploiting fund-level sustainability classifications and granular portfolio holdings. The central idea is that the relative…
Carbon credits are a key component of most national and organizational climate strategies. Financing and delivering carbon credits from forest-related activities faces multiple risks at the project and asset levels. Financial mechanisms are…
This paper investigates the risk spillovers among AI ETFs, AI tokens, and green markets using the R2 decomposition method. We reveal several key insights. First, the overall transmission connectedness index (TCI) closely aligns with the…
This paper introduces the concept of a global financial market for environmental indices, addressing sustainability concerns and aiming to attract institutional investors. Risk mitigation measures are implemented to manage inherent risks…
This work initiates research into the problem of determining an optimal investment strategy for investors with different attitudes towards the trade-offs of risk and profit. The probability distribution of the return values of the stocks…
We present an algorithm producing a dynamic non-self-financing hedging strategy in an incomplete market corresponding to investor-relevant risk criterion. The optimization is a two stage process that first determines admissible model…