Since the deregulation of electricity markets in the 1990s, U.S. power grids have witnessed the creation of an increasingly diverse suite of financial instruments designed to mitigate risks caused by underlying generation and consumption patterns. However, the nature of risks is shifting rapidly...

Directed acyclic graphs (DAGs) provide a transparent framework for encoding causal structures and identifying causal effects. This paper demonstrates how DAGs help specify local projections (LPs) for estimating causal impulse responses. Examples illustrate how graphical rules can be used to...

The essay delves into the impact of environmental uncertainty on asymmetric mispricing, utilizing the data from listed firms in China spanning from 2007 to 2023. Our analysis reveals that environmental uncertainty amplifies stock mispricing within capital markets, whether upward or downward....

Using world commodity prices as an instrument, this paper proposes a novel method for decomposing channels of international risk sharing for commodity-exporting countries. The method identifies the commodity “sector”' as the projection of gross national product growth on commodity-price...

Rapid urbanization in cities worldwide has led to significant environmental, social, and economic challenges. These include heightened exposure to extreme weather and climate events, increased air and water pollution, rising poverty levels, shrinking green spaces, and greater risks to lives,...

The aim of this report is, first, to inform about the current and projected changes to heat stress hazard and exposure as a result of climate change, particularly in urban areas; second, highlight the socioeconomic impacts of heat, including on human health, labor productivity, and mortality;...

The tax and transfer system partially insures households against individual income risk. We build a framework to assess the size and (welfare) value of this partial insurance, which is based on exploiting distributional differences between household gross income and disposable income. Our...

We study the ambiguity-adjusted return distribution induced by an investor with smooth ambiguity preferences 'a la Klibano! et al. (2005), who faces uncertainty about the variance of asset returns. The variance uncertainty is modeled using a gamma distribution, a second-order prior over the...

This paper examines how policy uncertainty influences retirement decisions. We develop a simple model in which individuals face a one-time choice between immediate retirement and continued employment until the statutory retirement age. In the absence of policy uncertainty, retirement decisions...

This paper studies the macroeconomic effects of global risk shocks (GRS) in a small open economy and their implications for the identification of monetary policy shocks. I construct a novel proxy for GRS based on unexpected daily innovations in the VIX and employ it as an external instrument in...

With the growing complexity and uncertainty of the global supply chain, firms face more severe supply chain risks. This study integrates subjective risk perception and objective risk exposure into a unified analytical framework to explore the impact of supply chain digitalization (SCD) on firms'...

While the environmental consequences of geopolitical tensions have received growing academic attention, little is known about how these dynamics manifest in the Middle East and Africa (MEA)-a region both environmentally vulnerable and geopolitically fragile. Even less is understood about how...

Central clearing counterparties (CCPs) manage counterparty risk by requiring clearing members to post margins. This paper explores the role of margins as "canaries in the coal mine:" By inducing defaults of fragile counterparties before contract maturity, margin calls enable CCPs to transfer...

Designing shared road spaces that accommodate multiple modes of transport is central to promoting active travel, but engagement can be hindered by perceptions of danger and unfairness, especially among groups more worried about navigating shared spaces. This study used an online randomised...

Locational marginal pricing (LMP) provides efficient locational dispatch and investment signals but requires a complementary congestion hedging instrument to function effectively. This paper investigates how exposure to locational price differences is managed in North American nodal electricity...

The lithium battery energy storage system (ESS) faces problems such as market price fluctuation and uncertainty of frequency modulation (FM) signals when participating in power market. Day-ahead bidding behavior bears revenue risk and real-time bidding behavior needs to adjust. It is necessary...

Workforce adjustments, such as mass layoffs, are significant corporate events that can influence stock returns and volatility, yet their broader asset-pricing implications remain underexplored. We examine the impact of such workforce shocks on stock performance from an asset-pricing perspective....

We calibrate a lifecycle portfolio-choice model of homeowners facing uninsurable income risk to show that tax deductions for mortgage interest payments and voluntary pension contributions have sizable effects on household portfolios and macroprudential risks. The deductions reduce the after-tax...

We use a novel data set containing all corporate loans throughout the Eurozone to document a series of novel stylized facts on the relationship between collateral and the probability of default. First, we show that the pervasive empirical finding that riskier borrowers pledge collateral is...

This paper examines the relevance of banks' exposure to climate transition risk in the interbank lending market. Using transaction-level data on repo agreements, we first establish that banks with higher exposure to transition risk face significantly higher borrowing costs. This premium is a...

We investigate the impact of structural shocks on the joint distribution of future real GDP growth and inflation in the euro area. We model the conditional mean of these variables, along with selected financial indicators, using a VAR and perform quantile regressions on the VAR residuals to...

We calibrate a lifecycle portfolio-choice model of homeowners facing uninsurable income risk to show that tax deductions for mortgage interest payments and voluntary pension contributions have sizable effects on household portfolios and macroprudential risks. The deductions reduce the after-tax...

Physical climate risks significantly influence banks' collateral practices. Drawing on comprehensive loan-level data from Sweden, we find that adverse weather events increase both the likelihood and the amount of collateral required for new loans. For existing loans, banks are less inclined to...

Money laundering poses a serious threat to financial stability and requires effective national frameworks for prevention. This study investigates how the quality of legal and institutional frameworks affects the effectiveness of national anti-money laundering (AML) systems and their implications...

Financial institutions face increased reputational, regulatory, and ethical risks as the frequency and complexity of Environmental, Social, and Governance (ESG) controversies increase. Whistleblowing mechanisms are essential in the context of institutional resilience and the mitigation of...

This study investigates how major agricultural commodities interact with diversified U.S. equity funds, sorted by their environmental, social, and governance (ESG) risk exposure. Using daily Morningstar data on 880 U.S. equity mutual funds, we construct portfolios representing high- and...

The interplay between government economic policy uncertainty (EPU) and bank risk remains a key concern in the financial stability literature. This study advances the field by examining the dynamic, time-varying impact of EPU on bank risk, explicitly differentiating between short- and long-term...