Climate Futures

Climate Futures

September 13th 2010

Speaker: Associate Professor Stefan Trück
Where: Building E5A Room 119
Time: 1.00-2.00pm
Audience: Academics and Students

Abstract: This paper presents a new approach that can be used for quantifying catastrophic risks and optimal adaptation strategies for local governments. It is particularly designed to incorporate localized information and projections into the estimation process to enable optimal environmental decision-making at the regional level. We suggest estimating the parameters of the distribution by combining historical data with expert opinions using Bayesian inference models, see e.g. Berger (1999) or Gelman et al (2003). Due to the small number of observations at the local scale, these approaches allow for combining observed losses with a prior distribution that can be based on an expert opinion, local characteristics or losses from external databases. In this way our model allows for structural modelling of different sources of information and statistical inference on an adequate distribution also for local governments or councils. Using a simulation approach for both frequencies and severities, it is possible to determine the distribution for each of the individual risk categories. Based on the estimated distribution, the effects of different adaptation strategies at the local scale can be evaluated with respect to their economic outcome. Applying a net-present value analysis, we illustrate how the approach can be used to analyse optimal environmental decision-making from the increasing crucial economic perspective.

Bio: Stefan Trück is an Associate Professor in the Economics Department of Macquarie University. He has held positions at Queensland University of Technology and University of Karlsruhe in Germany where he received a PhD in Statistics. His current research interests focus on risk management and financial econometrics including the fields of credit risk, operational risk, power markets, real estate finance and climate change. He further has several years of consulting experience for financial institutions in Europe.

Listen to this seminar

Back to the top of this page