eCite Digital Repository
Funding climate adaptation strategies with climate derivatives
Citation
Little, LR and Hobday, AJ and Parslow, J and Davies, CR and Grafton, RQ, Funding climate adaptation strategies with climate derivatives, Climate Risk Management, 8 pp. 9-15. ISSN 2212-0963 (2015) [Refereed Article]
 | PDF 814Kb |
Copyright Statement
Crown Copyright 2015. Licensed under Creative Commons Attribution 4.0 International (CC BY 4.0) https://creativecommons.org/licenses/by/4.0/
DOI: doi:10.1016/j.crm.2015.02.002
Abstract
Climate adaptation requires large capital investments that could be provided not only by traditional sources like governments and banks, but also by derivatives markets. Such markets would allow two parties with different tolerances and expectations about climate risks to transact for their mutual benefit and, in so doing, finance climate adaptation. Here we calculate the price of a derivative called a European put option, based on future sea surface temperature (SST) in Tasmania, Australia, with an 18 °C strike threshold. This price represents a quantifiable indicator of climate risk, and forms the basis for aquaculture industries exposed to the risk of higher SST to finance adaptation strategies through the sale of derivative contracts. Such contracts provide a real incentive to parties with different climate outlooks, or risk exposure to take a market assessment of climate change.
Item Details
| Item Type: | Refereed Article |
|---|---|
| Keywords: | climate arbitrage, option pricing, regional climate adaptation, stochastic simulation |
| Research Division: | Environmental Sciences |
| Research Group: | Environmental management |
| Research Field: | Environmental management |
| Objective Division: | Environmental Policy, Climate Change and Natural Hazards |
| Objective Group: | Adaptation to climate change |
| Objective Field: | Climate change adaptation measures (excl. ecosystem) |
| UTAS Author: | Little, LR (Dr Richard Little) |
| UTAS Author: | Hobday, AJ (Dr Alistair Hobday) |
| ID Code: | 118876 |
| Year Published: | 2015 |
| Deposited By: | Zoology |
| Deposited On: | 2017-07-21 |
| Last Modified: | 2017-09-26 |
| Downloads: | 174 View Download Statistics |
Repository Staff Only: item control page