Related papers: Hedging carbon risk with a network approach
We construct a correlation matrix based financial network for a set of New York Stock Exchange (NYSE) traded stocks with stocks corresponding to nodes and the links between them added one after the other, according to the strength of the…
This paper studies the equal risk pricing (ERP) framework for the valuation of European financial derivatives. This option pricing approach is consistent with global trading strategies by setting the premium as the value such that the…
In the context of whether investors are aware of carbon-related risks, it is often hypothesized that there may be a carbon premium in the value of stocks of firms, conferring an abnormal excess value to firms' shares as a form of…
A change from a high-carbon emitting electricity power system to one based on renewables would aid in the mitigation of climate change. Decarbonization of the electricity grid would allow for low-carbon heating, cooling and transport.…
The question of pricing and hedging a given contingent claim has a unique solution in a complete market framework. When some incompleteness is introduced, the problem becomes however more difficult. Several approaches have been adopted in…
US transmission systems and wholesale electricity markets, albeit federally regulated, often span across multiple state jurisdictions. In this environment, state regulators can strategically exploit this techno-economic coupling to advance…
We present a method for finding optimal hedging policies for arbitrary initial portfolios and market states. We develop a novel actor-critic algorithm for solving general risk-averse stochastic control problems and use it to learn hedging…
We develop a novel multivariate semi-parametric framework for joint portfolio Value-at-Risk (VaR) and Expected Shortfall (ES) forecasting. Unlike existing univariate semi-parametric approaches, the proposed framework explicitly models the…
This paper investigates the finite horizon risk-sensitive portfolio optimization in a regime-switching credit market with physical and information-induced default contagion. It is assumed that the underlying regime-switching process has…
Green hydrogen is essential for producing renewable fuels that are needed in sectors that are hard to electrify directly. Hydrogen production in a grid-connected hybrid renewable energy plant necessitates smart planning to meet long-term…
Grid-connected hybrid renewable power systems with energy storage can reduce the intermittency of renewable power supply. However, emerging energy storage technologies need improvement to compete with lithium-ion batteries and reduce the…
This paper explores the statistical properties of forming constrained optimal portfolios within a high-dimensional set of assets. We examine portfolios with tracking error constraints, those with simultaneous tracking error and weight…
A risk-averse agent hedges her exposure to a non-tradable risk factor $U$ using a correlated traded asset $S$ and accounts for the impact of her trades on both factors. The effect of the agent's trades on $U$ is referred to as cross-impact.…
Greenhouse gas emissions from the residential sector represent a significant fraction of global emissions. Governments and utilities have designed incentives to stimulate the adoption of decarbonization technologies such as rooftop PV and…
This paper presents a data-driven interpretable machine learning algorithm for semi-static hedging of Exchange Traded options, considering transaction costs with efficient run-time. Further, we provide empirical evidence on the performance…
The rise of FinTech has transformed financial services online, yet stock recommender systems have received limited attention. Personalized stock recommendations can significantly impact customer engagement and satisfaction within the…
Factor analysis is a statistical technique employed to evaluate how observed variables correlate through common factors and unique variables. While it is often used to analyze price movement in the unstable stock market, it does not always…
Turnpike theorems state that if an investor's utility is asymptotically equivalent to a power utility, then the optimal investment strategy converges to the CRRA strategy as the investment horizon tends to infinity. This paper aims to…
Amid China's dual-carbon transition, the synergistic alignment of green finance with green-technology innovation is pivotal for co-controlling pollution and CO2 emissions. Using panel data for 266 Chinese prefecture-level cities over…
We consider the problem of risk diversification in complex networks. Nodes represent e.g. financial actors, whereas weighted links represent e.g. financial obligations (credits/debts). Each node has a risk to fail because of losses…