regional-level mitigation or adaptation, which reduces disaster risks to capital in the interim. Mitigation depends on belief … regarding the adverse consequences of global warming. Pessimism jumps with a disaster and slowly reverts in the absence of … increasing cyclone frequency. For a typical country exposed to cyclones, a disaster arrival not only damages its capital stock …

optimal environmental policies. An appropriate model for this policy analysis requires sufficient risk aversion and fattailed …-Zin/Weil preferences, also separates the coefficient of relative risk aversion (important for results on environmental investment) from the … down, are the proportionate effect of environmental investment on the probability of environmental disaster and the …

the distribution for outcomes is fat-tailed. Furthermore, depending on the bound on marginal utility, the index of risk …

and forecasting. Building on the theory of continuous-time arbitrage-free price processes and the theory of quadratic … the large covariance matrices relevant in asset pricing, asset allocation and financial risk management applications …

Recent studies have shown that disaster risk can generate asset return moments similar to those observed in the U ….S. data. However, these studies have ignored the cross-country asset pricing implications of the disaster risk model. This … paper shows that standard U.S.-based disaster risk model assumptions found in the literature lead to counterfactual …

between consumption losses in a disaster and the risk premium, a small amount of risk sharing can significantly attenuate the … effect that disaster risk has on the equity premium. We characterize the sensitivity of risk premium to wealth distribution … lead to significant variation in disaster risk premium. It also highlights the conditions under which disaster risk premium …

public sector, it may be economically rational for those at risk not to invest in protective measures. Risk management …. These may include multi-year insurance contracts, well-enforced regulations, third-party inspections, and alternative risk …

shocks to aggregate uncertainty, I introduce a small, time-varying risk of economic disaster in a standard real business … risk of disaster does not affect the path of macroeconomic aggregates - a "separation theorem" between macroeconomic … probability of disaster leads to a collapse of investment and a recession, an increase in risk spreads, and a decrease in the …

A new options-pricing formula applies to far-out-of-the money put options on the overall stock market when disaster … risk is the dominant force, the size distribution of disasters follows a power law, and the economy has a representative … difference between the power-law tail parameter and the coefficient of relative risk aversion, γ. The options-pricing formula …