We consider the case of a non-infinitely-altruistic social planner who does not know the true climate and economic parameters of the DICE model and who, because of political or social constraints, cannot act optimally. We find that the impact of parameter uncertainty on economic outcomes is much...

We can limit the future temperature impact of climate change in two ways: (i) reducing our use of CO2 emitting fuels as an energy source (abatement), and (ii) using negative emission technologies (NETs) to remove existing CO2 from the atmosphere (removal). Using a modification of the DICE model,...

The paper present a simple, yet surprisingly effective, approximation for the no-arbitrage drifts that appear in LMM(-SABR)-family term structure models. The approximation reduces the burden of the computational bottleneck for these models by one order of magnitude. As the size of the problem...

Today's top financial-risk professionals have come to rely on ever-more sophisticated mathematics in their attempts to come to grips with financial risk. But this excessive reliance on quantitative precision is misleading--and it puts us all at risk. This is the case that Riccardo Rebonato makes...

This paper studies the codependence among, and drawdown and drawup properties of, US$ interest rates. The problem is attacked from the angle of regime switching. Different regimes are identified using the Hidden Markov Models (HMMs). The statistical properties in each state are examined...

An arbitrage-free two-factor model is presented, which is driven by the short rate and the consol yield, and which ensures log-normal short rate and positive rates. The market price of an arbitrary (discrete) set of discount bonds is recovered by construction, and an arbitrary degree of...

This work presents the first systematic analysis of the whole swaption matrix by fitting a parsimonious, nonlinear, financially-inspired volatility model to market data. The study uses several years of data spanning period of major market volatility. We find that the quality of the fits is good...