We examine if extreme weather exposure impacts firms’ cost of equity. Motivated by a consumption-based asset pricing model with heterogeneous agents, we reveal the existence of an extreme weather risk premium in the cross-section of stock returns. In the period from 1995 to 2019, domestic U.S....

We examine hurricane exposure as a systematic risk factor in the US stock market. Motivated by a consumption-based asset pricing model with heterogeneous agents, we derive a necessary and sufficient condition for a hurricane risk premium in the cross-section of stock returns. Empirically, we...

Historically, cat bonds have provided high single-digit average annual returns, paired with a low volatility and little correlation to other asset classes. While there is an extensive literature that explains (ex-ante) cat bonds spreads, there is no factor model in the academic literature that...