This paper uses a real options approach (ROA) for analysing the effects of government climate policy uncertainty on private investors' decision-making in the power sector. It presents an analysis undertaken by the International Energy Agency (IEA) that implements ROA within a dynamic programming...

We propose a new, minimally parameterized way of modeling stock-level covariances as a function of firm characteristics. Our model uses a large number of indicator functions to approximate the surface mapping two firms' characteristics to the correlation of their returns. We show that the method...