Dundee Discussion Papers in Economics 267: Global warming and fat tailed-uncertainty: rethinking the timing and intensity of climate policy

Yu-Fu Chen, Michael Funke

    Research output: Working paper/PreprintDiscussion paper

    Abstract

    The possibility of low-probability extreme natural events has reignited the debate over the optimal
    intensity and timing of climate policy. In this paper, we contribute to the literature by assessing the implications of low-probability extreme events on environmental policy in a continuous-time real
    options model with “tail risk”. In a nutshell, our results indicate the importance of tail risk and call for
    foresighted pre-emptive climate policies.
    Original languageEnglish
    PublisherUniversity of Dundee
    Number of pages22
    Publication statusPublished - Jun 2012

    Publication series

    NameDundee Discussion Papers in Economics
    PublisherUniversity of Dundee
    No.267
    ISSN (Print)1473-236X

    Keywords

    • Climate policy
    • Extreme events
    • Real options
    • Levy process

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