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Impact of Climate Change on Heat Wave Risk

Author

Listed:
  • Romain Biard

    (Laboratoire de mathématiques de Besançon, UMR CNRS 6623, 16 route de Gray, Besançon F-25030, France)

  • Christophette Blanchet-Scalliet

    (Université de Lyon, CNRS UMR 5208, École centrale de Lyon, Institut Camille Jordan, 36 avenue Guy de Collongue, Ecully Cedex F-69134, France)

  • Anne Eyraud-Loisel

    (Université de Lyon, Université Claude Bernard Lyon 1, Institut de Science Financière et d'Assurances, 50 Avenue Tony Garnier, Lyon F-69007, France)

  • Stéphane Loisel

    (Université de Lyon, Université Claude Bernard Lyon 1, Institut de Science Financière et d'Assurances, 50 Avenue Tony Garnier, Lyon F-69007, France)

Abstract

We study a new risk measure inspired from risk theory with a heat wave risk analysis motivation. We show that this risk measure and its sensitivities can be computed in practice for relevant temperature stochastic processes. This is in particular useful for measuring the potential impact of climate change on heat wave risk. Numerical illustrations are given.

Suggested Citation

  • Romain Biard & Christophette Blanchet-Scalliet & Anne Eyraud-Loisel & Stéphane Loisel, 2013. "Impact of Climate Change on Heat Wave Risk," Risks, MDPI, vol. 1(3), pages 1-16, December.
    • Handle: RePEc:gam:jrisks:v:1:y:2013:i:3:p:176-191:d:31293
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    References listed on IDEAS

    as
    1. Fred Espen Benth & Jurate Saltyte-Benth, 2005. "Stochastic Modelling of Temperature Variations with a View Towards Weather Derivatives," Applied Mathematical Finance, Taylor & Francis Journals, vol. 12(1), pages 53-85.
    2. Martin L. Weitzman, 2009. "On Modeling and Interpreting the Economics of Catastrophic Climate Change," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 1-19, February.
    3. Fred ESPEN Benth & Jurate saltyte Benth, 2007. "The volatility of temperature and pricing of weather derivatives," Quantitative Finance, Taylor & Francis Journals, vol. 7(5), pages 553-561.
    4. -, 2009. "The economics of climate change," Sede Subregional de la CEPAL para el Caribe (Estudios e Investigaciones) 38679, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    5. Stéphane Loisel, 2005. "Differentiation of functionals of risk processes and optimal reserve allocation," Post-Print hal-00397290, HAL.
    6. Stéphane Loisel, 2005. "Differentiation of some functionals of risk processes," Post-Print hal-00157739, HAL.
    7. Dorje Brody & Joanna Syroka & Mihail Zervos, 2002. "Dynamical pricing of weather derivatives," Quantitative Finance, Taylor & Francis Journals, vol. 2(3), pages 189-198.
    8. Stéphane Loisel, 2005. "Differentiation of some functionals of risk processes and optimal reserve allocation," Post-Print hal-00397289, HAL.
    9. Peter Alaton & Boualem Djehiche & David Stillberger, 2002. "On modelling and pricing weather derivatives," Applied Mathematical Finance, Taylor & Francis Journals, vol. 9(1), pages 1-20.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Georgia Warren-Myers & Gideon Aschwanden & Franz Fuerst & Andy Krause, 2018. "Estimating the Potential Risks of Sea Level Rise for Public and Private Property Ownership, Occupation and Management," Risks, MDPI, vol. 6(2), pages 1-21, April.

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    More about this item

    Keywords

    climate change; risk measure; heat wave risk; temperature modeling; Ornstein–Uhlenbeck process;
    All these keywords.

    JEL classification:

    • C - Mathematical and Quantitative Methods
    • G0 - Financial Economics - - General
    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting
    • K2 - Law and Economics - - Regulation and Business Law

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