it is my pleasure to invite you to the following seminar in Quantitative Finance, organised by LTI@UniTO (www.carloalberto.org/lti) and Collegio Carlo Alberto (CCA), that will take place at CCA in Torino and can be followed via zoom. At the event page link you can find the paper, the zoom link to attend online and a button to add the event to your calendars.

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March 22nd @ 12.00

Speaker: Peter Tankov (ENSAE)

Title: Decarbonization of financial markets: a mean-field game approach

Abstract: We build a model of a financial market where a large number of firms determine their dynamic emission strategies under climate transition risk in the presence of both green-minded and neutral investors. The firms aim to achieve a trade-off between financial and environ- mental performance, while interacting through the stochastic discount factor, determined in equilibrium by the investors’ allocations. We formalize the problem in the setting of mean-field games and prove the existence and uniqueness of a Nash equilibrium for firms. We then present a convergent numerical algorithm for computing this equilibrium and illustrate the impact of climate transition risk and the presence of green-minded investors on the market decarbonization dynamics and share prices. We show that uncertainty about future climate risks and policies leads to higher overall emissions and higher spreads between share prices of green and brown companies. This effect is partially reversed in the presence of environmentally concerned investors, whose impact on the cost of capital spurs companies to reduce emissions.

Event webpage link: https://www.carloalberto.org/event/peter-tankov-ensae/

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Luca Regis
Associate Professor
ESOMAS Department, University of Torino
Affiliate, Collegio Carlo Alberto
sites.google.com/view/lucaregis
Office: +39 011 670 6065
www.carloalberto.org/lti