We examine asset prices in a representative-agent model of general equilibrium. Assuming only that individuals are risk … averse, we determine conditions on the changes in asset risk that are both necessary and sufficient for the asset price to … incomplete in the sense of containing an uninsurable background risk, such as a risk on labor income. We extend our model to show …

We use perturbation methods to derive a rule for the optimal risk-adjusted social cost of carbon (SCC) that … different aversions to risk and intertemporal fluctuations, convex damages, uncertainties in economic growth, atmospheric carbon …-run climate feedbacks. Our non-certainty-equivalent rule for the SCC incorporates precaution, risk insurance, and climate …

We propose and implement a procedure to dynamically hedge climate change risk. We extract innovations from climate news … change hedge portfolios. We discipline the exercise by using third-party ESG scores of firms to model their climate risk … exposures. We show that this approach yields parsimonious and industry-balanced portfolios that perform well in hedging …