The carbon price of risk is commonly measured as the return spread between high and low carbon emitting firms. We show how this return spread is related to an original time-series factor: an emissions-weighted carbon factor. Two new methodologies are then introduced: one to decompose this return...

Using Credit Default Swap spreads, we construct a forward-looking, market-implied carbon risk factor and show that carbon risk affects firms' credit spread. The effect is larger for European than North American firms and varies substantially across industries, suggesting the market recognises...

We study whether carbon emissions affect firms' cost of capital by focusing on US corporate bond markets from 2005 to 2022. We show that firms with high carbon emissions have larger yields than firms with low emissions on the primary market, implying a higher cost of capital. However, this...

We examine how transition risk related to climate change affects the debt financing costs of carbon emitting firms. We derive a model of climate risk where firms operate with a dirty emissions-generating process that is exposed to technological change in the form of a competing clean-air...

The control of carbon emissions by policymakers poses the corporate challenge of developing an optimal carbon management policy. We provide a unified model that characterizes how firms should optimally manage emissions through production, green investment, and the trading of carbon credits. We...

Using Credit Default Swap spreads, we construct a forward-looking, market-implied carbon risk factor and show that carbon risk affects firms’ credit spread. The effect is larger for European than North American firms and varies substantially across industries, suggesting the market recognises...

This study provides an empirical investigation of the price volatility — trading volume relationship for the Carbon Financial Instrument (CFI). A CFI is a financial contract that is traded on the Chicago Climate Exchange (CCX) and represents the right to emit 100 metric tons of CO2 equivalent....

We provide the first econometric investigation of volatility dynamics for the Carbon Financial Instrument (CFI) traded on the Chicago Climate Exchange (CCX). A CFI is a financial contract with the right to emit 100 metric tons of CO2 equivalent. In this study, we present evidence of infrequent...

The purpose of this paper is to consider a valuation of GHG emission rights, especially CERs from CDM projects with a real option and game-theoretic approach. There has been no study that tried to prove a valuation of them with a real option and game-theoretic approach.The following results were...