Optimal risk management considering environmental and climatic changes.

Climate change presents challenges to policy and economic stability, necessitating effective trading strategies to reduce environmental risks. This article addresses gaps in existing studies by using a Markov-switching model to consider climate risk. Backward stochastic differential equations are used to optimize utility with three hedging strategies based on the concept of risk aversion. Numerical scenarios confirm the model's superiority in incorporating exogenous events, with our risk-averse strategy outperforming classical approaches. Our strategy outperforms classical strategies by taking a flexible risk trading when investors face risk-averse behavior due to climate risk events. The findings presented in this article have important implications for the development of more resilient investment portfolios and can contribute to climate policy.

Financial contagion intensity during the COVID-19 outbreak: A copula approach.

The sudden and rapid spread of the novel coronavirus (COVID-19) has had a severe impact on financial markets and economic activities all over the world. The purpose of this paper is to investigate the existence and intensity of financial contagion during the COVID-19 outbreak. We use daily series of stock indexes of 10 Asian countries (Taiwan, Hong Kong, Singapore, India, Indonesia, Malaysia, South Korea, Vietnam, Australia and China) and 4 American countries (the United-States, Brazil, Mexico, and Argentina) over the period starting from January 1st, 2014 to June 30th, 2021. Based on a copula approach, the results show that all studied markets are affected by the COVID-19 outbreak and the presence of financial contagion for all American and Asian countries. The results also show that contagion is more intense for American countries than Asian ones. These findings have practical implications, especially for investors, risk managers, and policy makers. The latter should continue to provide liquidity to the international market during this pandemic.

COVID-19 crisis and risk spillovers to developing economies: Evidence from Africa.

This study provides new evidence on how risk spillovers occur from the United States to developing economies in Africa during the COVID-19 pandemic. The results show that downside risk exposures of African markets, financial firms and banks particularly increased during Phase I (30 January to 30 April 2020). The nature and magnitude of downside risk exposures of African financial markets were similar to those of the United States. Our results also reveal that the United States is a net transmitter of risk spillovers while Nigeria, South Africa, Egypt and Morocco are net recipients. Our conclusions offer guidance to risk managers, policymakers and investors.