Coberturas financieras para mitigar los efectos del cambio climático: Financial coverage to mitigate the effects of climate change

Guillermo Sierra Juárez

doi:10.29105/ensayos45.1-1

Authors

Guillermo Sierra Juárez Universidad de Guadalajara https://orcid.org/0000-0002-1927-834X

DOI:

https://doi.org/10.29105/ensayos45.1-1

Keywords:

C02, G13, Q54

Abstract

Objective: in order to estimate the value of a financial option premium to hedge against the effects of climate change, particularly in light of the global rise in sea level caused by the increase in average global temperature and in the specific cases of the United States and Mexico. Method: The Heston model is considered within the financial option theory methodology, which proposes that sea level behavior is a geometric Brownian motion that is a function of the increase in average temperature, also modeled as a geometric Brownian motion with reversion to the mean. The solution is found using the Monte Carlo simulation method. Results: According to the proposed model, if the correlation between the increase in sea level and average temperature is positive, the price of coverage would be more expensive, like flood insurance. On the other hand, the slower the convergence to the long-term value of the average temperature, the more expensive the value of the coverage would be. Main findings: Under the assumptions of the Heston model, the price of flood insurance due to sea level rise caused by an increase in average temperature as a result of climate change is a function of the level of correlation between the variables, their convergence in the long term, and volatility. To consider a practical case, it would have to be calibrated and adjusted in units, and it must be taken into account that this is an incomplete market.

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Author Biography

Guillermo Sierra Juárez, Universidad de Guadalajara

EL Dr. Guillermo Sierra Juárez es Profesor -Investigador del Departamento de Métodos Cuantitativos del CUCEA de la Universidad de Guadalajara. Estudió su Doctorado en el ITESM CCM y la maestría en economía en el Colegio de México. Además es miembro del Sistema Nacional de Investigación (Nivel II) y fue ganador del Premio Nacional de Derivados 2007. En el aspecto laboral se ha desempeñado en el sector privado dentro de la banca (BBVA, SANTANDER y BMV) y en el sector público en el SECIHTI e IMSS.

El Dr. Sierra cuenta con publicaciones sobre los temas de finanzas cuantitativas, riesgos y derivados y también ha sido director de diversas tesis de licenciatura, maestría y doctorado. Así mismo, ha impartido conferencias y seminarios en distintas instituciones nacionales e internacionales.

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