Asymptotic PIK: Climatic Risks and Financial Markets
January 2004 until December 2008
Carlo Jäger
PIK number / OEH

The project will build a series of software modules designed to represent the interaction between climatic risks and financial markets. The modules will fit the framework of the CIAMn approach as pursued in several other PIK-projects. AsPIK follows a cautious multi-agent design. We start with a small number of aggregated agents – insurance firms, banks, generic businesses, households, and governments. They form Bayesian expectations on climate risks, while differing in priors and risk aversion. They equilibrate spot, but not forward markets. In this setting, we use asymptotic methods to study the interaction between short- and long-term risk management.