nep-upt New Economics Papers
on Utility Models and Prospect Theory
Issue of 2020‒06‒08
twenty papers chosen by

  1. Recursive objective and subjective multiple priors By Federica Ceron; Vassili Vergopoulos
  2. Optimal provision of a public good with costly exclusion By Nicolas Gravel; Michel Poitevin
  3. Using multiple reference levels in Multi-Criteria Decision aid: The Generalized-Additive Independence model and the Choquet integral approaches By Christophe Labreuche; Michel Grabisch
  4. Savage's Theorem Under Changing Awareness By Franz Dietrich
  5. The Risk-Sharing problem under limited liability constraints in a single-period model By Jessica Martin
  6. Robust Identification of Investor Beliefs By Xiaohong Chen; Lars P. Hansen; Peter G. Hansen
  7. Rank Robustness of Composite Indices: Dominance and Ambiguity By James Foster, Mark McGillivray and Suman Seth
  8. Risk Preferences at the Time of COVID-19: An Experiment with Professional Traders and Students By Marco Angrisani; Marco Cipriani; Antonio Guarino; Ryan Kendall; Julen Ortiz de Zarate Pina
  9. Bias in purchase decisions: correlation between expectations and procrastination in high and low involvement products By Federico Gaudenzi
  10. The Forward Premium in Electricity Markets: An Experimental Study By Silvester Van Koten
  11. A Characterisation of Trading Equilibria in Market Games By Mitra, Manipushpak; Ray, Indrajit; Roy, Souvik
  12. A Dynamic Conditional Approach to Portfolio Weights Forecasting By Fabrizio Cipollini; Giampiero Gallo; Alessandro Palandri
  13. Guilt Aversion in (New) Games: the Role of Vulnerability By Giuseppe Attanasi; Claire Rimbaud; Marie-Claire Villeval
  14. Inefficiency and Regulation in Credence Goods Markets with Altruistic Experts By Razi Farukh; Anna Kerkhof; Jonas Loebbing
  15. Living preferences of STEM workers in a high-tech business park of a peripheral region By Hooijen, Inge; Cörvers, Frank
  16. Рождение макроэкономического порядка из микроэкономического хаоса By Leiashvily, Paata
  17. Other-Regarding Preferences and Giving Decision in Risky Environments: Experimental Evidence By Mickaël Beaud; Mathieu Lefebvre; Julie Rosaz
  18. Becoming sensitive: Males’ risk and time preferences after the 2008 Financial Crisis By Michael Jetter; Leandro M. Magnusson; Sebastian Roth
  19. Leading the Fight Against the Pandemic: Does Gender ‘Really’ Matter? By Supriya Garikipati; Uma Kambhampati
  20. Climate Risk Assessment of the Sovereign Bond Portfolio of European Insurers By Stefano Battiston; Petr Jakubik; Irene Monasterolo; Keywan Riahi; Bas van Ruijven

  1. By: Federica Ceron (UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12); Vassili Vergopoulos (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)
    Abstract: We provide an axiomatic characterization of recursive Maxmin preferences that stem from (possibly) incomplete preferences representing choices that are justified by hard evidence. The decision-maker disposes of objective probabilistic information that may induce dynamically inconsistent behavior. To ensure that her choices be informed by objective information, dynamically consistent, and ambiguity averse, she constructs her subjective set of priors as the rectangular hull of the objective information set. The characterization builds upon two axioms that naturally combine these three requirements in a behavioral way. Moreover, our main result suggests a principled justification for the use of recursive Maxmin preferences in applications to dynamic choice problems.
    Keywords: Rectangularity,Rectangularization,Maxmin Expected Utility,Unanimity Rule,Dynamic Consistency,Prior-by-prior Updating,Objective and Subjective Rationality Keywords: Rectangularity,Unanim- ity Rule,Objective and Subjective Rationality JEL classification: D81
    Date: 2020–05
  2. By: Nicolas Gravel (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université); Michel Poitevin (CIREQ - Centre interuniversitaire de recherche en économie quantitative)
    Abstract: We examine the problem of providing a non-rival and excludable public good to individuals with the same preferences and differing contributing capacities. Exclusion from the public good is costly in the sense that if two different quantities of the public good are consumed in the community, then the sum of the costs of providing the two quantities must be borne. By contrast, costless exclusion only requires the cost of the largest quantity consumed of the public good to be financed. We show that despite its important cost, providing public goods in different quantities is often part of any optimal provision of public good when the public authority is imperfectly informed about the agents' contributive capacities. In the specific situation where individuals have an additively separable logarithmic utility function, we provide a complete characterization of the optimal exclusion structure in the two-type case. We also show that the preference for such a costly exclusion is more likely when the heterogeneity in the population or income is large, and when the aversion to utility inequality is important.
    Keywords: Mechanism design,Asymmetric information,Public goods,Costly exclusion
    Date: 2019–09
  3. By: Christophe Labreuche (UMP CNRS/THALES - Unité mixte de physique CNRS/Thalès - THALES - CNRS - Centre National de la Recherche Scientifique); Michel Grabisch (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne, PSE - Paris School of Economics)
    Abstract: In many Multi-Criteria Decision problems, one can construct with the decision maker several reference levels on the attributes such that some decision strategies are conditional on the comparison with these reference levels. The classical models (such as the Choquet integral) cannot represent these preferences. We are then interested in two models. The first one is the Choquet with respect to a p-ary capacity combined with utility functions, where the p-ary capacity is obtained from the reference levels. The second one is a specialization of the Generalized-Additive Independence (GAI) model, which is discretized to fit with the presence of reference levels. These two models share common properties (monotonicity, continuity, properly weighted,.. .), but differ on the interpolation means (Lovász extension for the Choquet integral, and multi-linear extension for the GAI model). A drawback of the use of the Choquet integral with respect to a p-ary capacity is that it cannot satisfy decision strategies in each domain bounded by two successive reference levels that are completely independent of one another. We show that this is not the case with the GAI model.
    Keywords: Generalized Additive Independence,Multiple criteria analysis
    Date: 2018–06
  4. By: Franz Dietrich (PSE - Paris School of Economics, CNRS - Centre National de la Recherche Scientifique, CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne)
    Abstract: This paper proposes a simple unified framework of choice under changing awareness, addressing both outcome awareness and (nature) state awareness, and both how fine and how exhaustive the awareness is. Six axioms characterize an (essentially unique) expected-utility rationalization of preferences, in which utilities and probabilities are revised according to three revision rules when awareness changes: (R1) utilities of unaffected outcomes are transformed affinely; (R2) probabilities of unaffected events are transformed proportionally; (R3) enough probabilities ‘objectively' never change (they represent revealed objective risk). Savage's Theorem is a special case of the theorem, namely the special case of fixed awareness, in which our axioms reduce to Savage's axioms while R1 and R2 hold trivially and R3 reduces to Savage's requirement of atomless probabilities. Rule R2 parallels Karni and Viero's (2013) ‘reverse Bayesianism' and Ahn and Ergin's (2010) ‘partition-dependence'. The theorem draws mathematically on Kopylov (2007), Niiniluoto (1972) and Wakker (1981).
    Date: 2018–07
  5. By: Jessica Martin (INSA Toulouse - Institut National des Sciences Appliquées - Toulouse - INSA - Institut National des Sciences Appliquées)
    Abstract: This work provides analysis of a variant of the Risk-Sharing Principal-Agent problem in a single period setting with additional constant lower and upper bounds on the wage paid to the Agent. First the effect of the extra constraints on optimal contract existence is analyzed and leads to conditions on utilities under which an optimum may be attained. Solution characterization is then provided along with the derivation of a Borch rule for Limited Liability. Finally the CARA utility case is considered and a closed form optimal wage and action are obtained. This allows for analysis of the classical CARA utility and gaussian setting.
    Date: 2020–05–07
  6. By: Xiaohong Chen (Cowles Foundation, Yale University); Lars P. Hansen (University of Chicago); Peter G. Hansen (MIT Sloan)
    Abstract: This paper develops a new method informed by data and models to recover information about investor beliefs. Our approach uses information embedded in forward-looking asset prices in conjunction with asset pricing models. We step back from presuming rational expectations and entertain potential belief distortions bounded by a statistical measure of discrepancy. Additionally, our method allows for the direct use of sparse survey evidence to make these bounds more informative. Within our framework, market-implied beliefs may differ from those implied by rational expectations due to behavioral/psychological biases of investors, ambiguity aversion, or omitted permanent components to valuation. Formally, we represent evidence about investor beliefs using a novel nonlinear expectation function deduced using model-implied moment conditions and bounds on statistical divergence. We illustrate our method with a prototypical example from macro-ï¬ nance using asset market data to infer belief restrictions for macroeconomic growth rates.
    Keywords: Asset pricing, Subjective beliefs, Long-term uncertainty, Ambiguity aversion, Cressie-Read divergence, Generalized empirical likelihood, Large deviation theory
    Date: 2020–05
  7. By: James Foster, Mark McGillivray and Suman Seth
    Abstract: Many structures in economics - from development indices to expected utility - take the form of a linear composite index, which aggregates linearly across multiple dimensions using a vector of weights. Judgments rendered by composite indices are often given great importance, yet by definition are contingent on an initial vector of weights. A comparison made with one weighting vector could be robust to variations in the weights or, alternatively, it may be reversed at some other plausible vector. This paper presents criteria to discern between these two cases. A general robustness quasi-ordering is defined that requires dominance or unanimous comparisons for a set of weighting vectors, and methods from the Bewley model of Knightian uncertainty are invoked to characterize it. We focus on a particular set of weighting vectors suggested by the epsilon-contamination model of ambiguity, which allows the degree of confidence in the initial weighting vector to play a role. We provide a practical vector-valued representation of the resulting epsilon-robustness quasi-ordering and propose a numerical measure to gauge the robustness of a given comparison. An empirical illustration reports on the robustness of Human Development Index country rankings. We extend our methods to certain nonlinear composite indices and explore the links with decision theory, partial comparability in social choice, and the measurement of the freedom of choice.
  8. By: Marco Angrisani; Marco Cipriani; Antonio Guarino; Ryan Kendall; Julen Ortiz de Zarate Pina
    Abstract: We study whether the COVID-19 pandemic has impacted risk preferences, comparing the results of experiments conducted before and during the outbreak. In each experiment, we elicit risk preferences from two sample groups: professional traders and undergraduate students. We find that, on average, risk preferences have remained constant for both pools of participants. Our results suggest that the increases in risk premia observed during the pandemic are not due to changes in risk appetite; rather, they are solely due to a change in beliefs by market participants. The findings of our paper support the traditional view that, at least on average, risk preferences are not affected by economic or social circumstances.
    Keywords: risk aversion; financial markets professional; COVID-19; experimental economics
    JEL: D81 D91 N0
    Date: 2020–05–01
  9. By: Federico Gaudenzi (MYRIADS - Design and Implementation of Autonomous Distributed Systems - Inria Rennes – Bretagne Atlantique - Inria - Institut National de Recherche en Informatique et en Automatique - IRISA-D1 - SYSTÈMES LARGE ÉCHELLE - IRISA - Institut de Recherche en Informatique et Systèmes Aléatoires - UR1 - Université de Rennes 1 - UNIV-RENNES - Université de Rennes - INSA Rennes - Institut National des Sciences Appliquées - Rennes - INSA - Institut National des Sciences Appliquées - UNIV-RENNES - Université de Rennes - UBS - Université de Bretagne Sud - ENS Rennes - École normale supérieure - Rennes - Inria - Institut National de Recherche en Informatique et en Automatique - Télécom Bretagne - CentraleSupélec - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper examines the presence and implications of expectation formation on purchase decisions for high and low involvement products. The survey highlights the presence of expectations characterized by the identification of an ideal prototype and a consequent phenomenon of procrastination of the purchase if the desired prototype is not present among the available alternatives. Procrastination is interpreted as a manifestation of consumer dissatisfaction. The results of the study show that the correlation between expectations and procrastination of purchase is present only for high involvement products and not for low involvement products. The difference in behaviour between high and low involvement products is interpreted as an inherent bias in the purchase decision.
    Keywords: Bias,purchase decisions,expectations,procrastination,involvement products
    Date: 2020–05–01
  10. By: Silvester Van Koten
    Abstract: An economic laboratory experiment is used to test the validity of Bessembinder and Lemmon's (2002) seminal risk premium theory. The theory predicts that forward premia in electricity markets are determined by the statistical properties of demand. The existing empirical evidence is mixed, possibly as a result of the lack of observability of key variables. Specifically, the experiment tests if an increase in the variance of demand makes the forward premia more negative for specific parameters and implementation details. The experimental results corroborate the theoretical predictions.
    Keywords: forward premia; electricity markets; economic experiments;
    JEL: C92 G13 L94 Q47
    Date: 2020–05
  11. By: Mitra, Manipushpak (Economic Research Unit, Indian Statistical Institute); Ray, Indrajit (Cardiff Business School); Roy, Souvik (Economic Research Unit, Indian Statistical Institute,)
    Abstract: We provide a full characterisation of the set of trading equilibria (in which all goods are traded at a positive price) in a strategic market game (as introduced by Shapley and Shubik), for both the Òbuy and sellÓ and the Òbuy or sellÓ versions of this model under standard assumptions on the utility functions. We also interpret and illustrate our main equilibrium-characterising condition, using simple examples.
    Keywords: strategic market game, trading equilibrium, buy and sell, buy or sell.
    JEL: C72 D44
    Date: 2020–05
  12. By: Fabrizio Cipollini (Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti", Università di Firenze); Giampiero Gallo (New York University in Florence); Alessandro Palandri (Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti", Università di Firenze)
    Abstract: We build the time series of optimal realized portfolio weights from high-frequency data and we suggest a novel Dynamic Conditional Weights (DCW) model for their dynamics. DCW is benchmarked against popular model-based and model-free specifications in terms of weights forecasts and portfolio allocations. Next to portfolio variance, certainty equivalent and turnover, we introduce the break-even transaction costs as an additional measure that identifies the range of transaction costs for which one allocation is preferred to another. By comparing minimum-variance portfolios built on the components of the Dow Jones 30 Index, the proposed DCW overall attains the best allocations with respect to the measures considered, for any degree of risk-aversion, transaction costs and exposure.
    Keywords: Portfolio Allocation, Realized Volatility, Realized Correlations, Dynamic Conditional Modeling, Portfolio Weights Modeling
    JEL: C32 C53 G11 G17
    Date: 2020–05
  13. By: Giuseppe Attanasi (Université Côte d'Azur; CNRS, GREDEG, France); Claire Rimbaud (Université Lyon 2; GATE CNRS); Marie-Claire Villeval (Université Lyon 2; GATE CNRS)
    Abstract: From the literature we know that contextual factors modulate guilt aversion, such as pre-play communication and social closeness. In this study, we investigate whether a particular feature of the game itself = the vulnerability of the co-players = affects a player's guilt aversion. We deem that a co-player is (i) ex-post vulnerable when her final payoff depends on the decision-maker's actions, and (ii) ex-ante vulnerable when the use of her initial endowment depends on the decision-maker's actions. In a laboratory experiment, we introduce four (new) three-player trust games played within-subjects, varying whether the trustees can condition their decision on the belief of another player who is ex-post vulnerable and/or ex-ante vulnerable. We put forward a portable model of lexicographic altruism and role-dependent guilt, where the trustee can only be altruistic toward the most disadvantaged player and can feel guilty simply because of his role in the game. We find that trustees' guilt aversion is insensitive to the opponents' vulnerability and to the role of the vulnerable player.
    Keywords: Guilt aversion, vulnerability, psychological game theory, experiment
    JEL: C72 C91 D91
    Date: 2020–05
  14. By: Razi Farukh; Anna Kerkhof; Jonas Loebbing
    Abstract: We study a credence goods problem - that is, a moral hazard problem with non-contractible outcome - where altruistic experts (the agents) care both about their income and the utility of consumers (the principals). Experts' marginal rate of substitution between income and consumer utility declines in income, such that experts care less for consumers when their financial situation is bad. In a market setting with multiple consumers per expert, a cross-consumer externality arises: one consumer's payment raises the expert's income, which makes the non-selfish part of preferences more important and thereby induces the expert to provide higher quality services to all consumers. The externality renders the market outcome inefficient. Price regulation partially overcomes this inefficiency and Pareto-improves upon the market outcome. If market entry of experts is endogenous, price regulation should be accompanied by entry restrictions. Our theory provides a novel rationale for the widespread use of price and entry regulation in real-world markets for expert services.
    Date: 2020–05–26
  15. By: Hooijen, Inge (ROA / Human capital in the region, RS: GSBE Theme Learning and Work); Cörvers, Frank (RS: GSBE Theme Learning and Work, RS: FdR Institute ITEM, RS: SBE - MACIMIDE, ROA / Human capital in the region)
    Abstract: Despite the importance of STEM workers to regional economies, scientists and policymakers have a limited understanding of how to recruit this scarce target group, particularly in offering an attractive living environment. This case study uses self-reported overall life satisfaction to explore the living preferences of STEM workers employed at a high-tech business park (HTBP) in a demographically shrinking region in the southern periphery of the Netherlands. We argue that individuals’ self-evaluation of life satisfaction is a proxy for their individual utility and thereby indicates the preferred features of the geographical unit in which they reside. We relate the survey data of 420 employees at the business park to the specific characteristics of the municipalities they live in, complemented by qualitative data from 32 semi-structured interviews with these workers. We conclude that the average STEM worker at the HTBP prefers to reside in places of lower extraversion, which are often characterized by a suburban lifestyle, green areas, and open spaces, including a little touch of consumer amenities.
    JEL: J11 O18 R11 R23 R58
    Date: 2020–05–19
  16. By: Leiashvily, Paata
    Abstract: В данной статье рассмотрена проблема самоорганизации экономических процессов в условиях совершенной конкуренции, основанной на взаимодействии индивидуальных и общественных экономических ценностей и рыночных цен. На основе диалектического анализа показано глубокое внутреннее единство проиозводства и потребления, спроса и предложения, полезности и затрат и др. категорий, которые обуславливают функциональную замкнутость и целостность экономической системы, как необходимое условие для понимания процесса формирования макроэкономического порядка из микроэкономического хаоса. На методологической основе диалектики дается новое понимание механизма саморегулирования рыночных процессов и экономической оптимизации. Предлагаемое теоретическое объяснение экономических процессов позволит создать более адекватные прикладные экономические модели и выработать эффективную экономическую политику. In this article, the problem of self-organization of economic processes in conditions of perfect competition, based on the interaction of individual and public economic values and market prices, is considered. On the basis of dialectical analysis, the deep internal unity of production and consumption, supply and demand, utility and costs, and other categories that determine the functional closeness and integrity of economic system as a necessary condition for to understand the formation process of a macroeconomic order from microeconomic chaos is shown. A new understanding of market processes' self-regulation mechanism and economic optimization on the methodological basis of dialectics is given. The proposed theoretical explanation of economic processes makes it possible to create more adequate applied economic models and develop an effective economic policy.
    Keywords: диалектика, саморегулирование, экономическое равновесие, экономическая ценность, рыночные цены, критерии оптимальности. dialectics, self-regulation, economic equilibrium, economic value, market prices, optimality criteria.
    JEL: A10 C00 D50 E00
    Date: 2018–07–07
  17. By: Mickaël Beaud (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier); Mathieu Lefebvre (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - CNRS - Centre National de la Recherche Scientifique - UL - Université de Lorraine - UNISTRA - Université de Strasbourg); Julie Rosaz (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS - Centre National de la Recherche Scientifique - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UL2 - Université Lumière - Lyon 2 - ENS Lyon - École normale supérieure - Lyon)
    Abstract: This paper investigates if and how other-regarding preferences governing giving decisions in dictator games are affected in risky environments in which the payoff of the recipient is random. We demonstrate that, whenever the risk is actuarially neutral, the donation of dictators with a purely ex post view of fairness should, in general, be affected by the riskyness of the recipient's payoff, while dictators with a purely ex ante view should not be. Our experimental data give weak empirical support to the purely ex post view of fairness.
    Keywords: ex ante and ex post views of fairness,impure altruism,Laboratory experiments dictator games,background risk,other-regarding preferences,Inequality aversion
    Date: 2018–09–11
  18. By: Michael Jetter (Economics Discipline, Business School, University of Western Australia IZA, CESifo); Leandro M. Magnusson (Economics Discipline, Business School, University of Western Australia); Sebastian Roth (Economics Discipline, Business School, University of Western Australia)
    Abstract: This paper presents evidence suggesting men’s (but not women’s) risk and time preferences have systematically become sensitive to local economic conditions since the 2008 financial crisis. Studying longitudinal, nationally representative data for 22,579 Australian-based respondents in up to 11 surveys from 2002-2015, men respond with increased risk aversion and impatience to a rise in their region’s unemployment rate – but only since 2008. We find no such relationship for women or before the crisis. This conclusion persists when accounting for individual-level fixed effects, demographics, national economic conditions, the individual’s employment situation, income, wealth, as well as region- and time-specific unobservables. Exploring a potential mechanism, higher regional unemployment rates are also linked to men (but not women) being more unhappy since 2008. This ‘happiness channel’ only partially explains the link between the local unemployment rate and risk preferences.
    Keywords: Risk preferences; Time preferences; Gender differences; Financial crisis
    JEL: D81 G11 G14 J16
    Date: 2020
  19. By: Supriya Garikipati (Management School, University of Liverpool); Uma Kambhampati (Department of Economics, University of Reading)
    Abstract: Since the start of the ongoing coronavirus pandemic, the relationship between national female leaders and their effectiveness in handling the COVID-crisis has received a lot of media attention. In this paper we scrutinise this association more systematically. We ask if there is a significant and systematic difference by gender of the national leader in the number of COVID-cases and deaths in the first quarter of the pandemic. We also examine differences in policy responses by male vs. female leaders as plausible explanations for the differences in outcomes. Using a constructed dataset for 194 countries, a variety of socio-demographic variables are used to match nearest neighbours. Our findings show that COVID-outcomes are systematically better in countries led by women and, to some extent, this may be explained by the proactive and coordinated policy responses adopted by them. We use insights from behavioural studies and leadership literature to speculate on the sources of these differences, as well as on their implications. Our hope is that this article will serve as a starting point to illuminate the discussion on the influence of national leaders in explaining the differences in country COVID-outcomes.
    Keywords: COVID-19, Pandemic, National Leadership, Women Leaders, Risk Aversion
    Date: 2020–06–03
  20. By: Stefano Battiston; Petr Jakubik; Irene Monasterolo; Keywan Riahi; Bas van Ruijven (EIOPA)
    Abstract: In the first collaboration between climate economists, climate financial risk modellers and financial regulators, we apply the CLIMAFIN framework described in Battiston at al. (2019) to provide a forward-looking climate transition risk assessment of the sovereign bonds’ portfolios of solo insurance companies in Europe. We consider a scenario of a disorderly introduction of climate policies that cannot be fully anticipated and priced in by investors. First, we analyse the shock on the market share and profitability of carbon-intensive and low-carbon activities under climate transition risk scenarios. Second, we define the climate risk management strategy under uncertainty for a risk averse investor that aims to minimise her largest losses. Third, we price the climate policies scenarios in the probability of default of the individual overeign bonds and in the bonds’ climate spread. Finally, we estimate the largest gains/losses on the insurance companies’ portfolios conditioned to the climate scenarios. We find that the potential impact of a disorderly transition to low-carbon economy on insurers portfolios of sovereign bonds is moderate in terms of its magnitude. However, it is non-negligible in several scenarios. Thus, it should be regularly monitored and assessed given the importance of sovereign bonds in insurers’ investment portfolios.
    Keywords: insurance, climate risk, sovereign bonds
    JEL: G11 G12 G22
    Date: 2019–12

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