[AMATH Seminar] Robert Litterman on "Pricing Climate Risk"

Start Date/Time: Wednesday, April 04, 2012, 4:00 PM
Ending Date/Time: Tuesday, April 10, 2012, 5:00 PM
Location: PACCAR 394

Speaker Robert Litterman, Partner, Kepos Capital will speak on the topic of Pricing Climate Risk.

The event is sponsored by the UW Department of Applied Math - Computational Finance Program

Climate risk should be priced appropriately. Modern understanding of the pricing of non-diversifiable risks implies that the appropriate price is a function of expected damages plus a risk premium that is driven by the full distribution of outcomes and societal risk aversion. The probability of tail events associated with unknown climate risks is very uncertain. Societal risk aversion, as measured in the equity risk premium, is surprisingly high. There is never an economic argument for smoothing prices. Thus, the appropriate government policy today is to immediately price GHG emissions at a level which will dramatically change human behavior in a short period of time. Not pricing climate risk appropriately wastefully uses up a scarce resource, the earth’s ability to safely absorb GHG emissions. Current government policy, which subsidizes the production of GHG emissions, increases the burden on all future generations as well as increasing the probability of a future climate catastrophe. In short, it is time to slam on the brakes.

BIO: Robert Litterman is a partner in Kepos Capital. He is a 23 year veteran of Goldman Sachs and has been described as one of their “top quants”. Previously he was an advisor to the Singapore Sovereign Wealth fund, and served as Chairman of the Quantitative Investment Strategies group of Goldman Sachs Asset Management. He was a co-developer with Fischer Black of the Black-Litterman asset allocation model. He will also be keynote speaker at the CFA 2012 Forecast Dinner in Seattle on the following night (April 11th).

We are asking that individuals please RSVP if they wish to attend. To RSVP, the College of the Environment invitees should please respond to the following link: https://catalyst.uw.edu/webq/survey/learner/163569.