Abstract
Municipal bond markets began pricing sea-level rise (SLR) exposure risk in 2013, coinciding with upward revisions to worst-case SLR projections and accompanying uncertainty around these projections. The effect is larger for long-maturity bonds and not solely driven by near-term flood risk. We use a structural model of credit risk to quantify the implied economic impact and distinguish between the effects of underlying asset values and of uncertainty. The SLR exposure premium exhibits a trend different from house prices and is unaffected by house price controls. Together, our results highlight the importance of climate uncertainty in driving municipal bond prices.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 4588-4635 |
| Number of pages | 48 |
| Journal | Review of Financial Studies |
| Volume | 36 |
| Issue number | 11 |
| DOIs | |
| State | Published - Nov 1 2023 |
UN SDGs
This output contributes to the following UN Sustainable Development Goals (SDGs)
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SDG 13 Climate Action
All Science Journal Classification (ASJC) codes
- Accounting
- Finance
- Economics and Econometrics
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