Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/39059
Authors: 
Chen, Yu-Fu
Funke, Michael
Year of Publication: 
2010
Series/Report no.: 
CESifo working paper Resources and Environment 3139
Abstract: 
The possibility of low-probability extreme events has reignited the debate over the optimal intensity and timing of climate policy. In this paper we therefore 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.
Subjects: 
climate policy
extreme events
real options
Levy process
JEL: 
D81
Q54
Q58
Document Type: 
Working Paper

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