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Hedge portfolio for climate transition risk.

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Název: Hedge portfolio for climate transition risk.
Autoři: Wei, Lijun1 (AUTHOR), Xu, Fengmin1 (AUTHOR), Jing, Kui1 (AUTHOR) jingkui@xjtu.edu.cn
Zdroj: Applied Economics. Nov2025, p1-23. 23p. 8 Illustrations.
Témata: *HEDGING (Finance), *RISK assessment, *INVESTMENT analysis, *SUSTAINABLE development, *PORTFOLIO management (Investments), *INVESTORS, RISK assessment of climate change, CONTENT analysis
Abstrakt: Climate transition risks, arising from the global shift towards a low-carbon economy, pose challenges for investors due to their long-term and systematic nature. We propose a new downside deviation hedge portfolio (DDHP) model to hedge against climate transition risks, which are measured through LDA-based text analysis of climate news. In contrast to the traditional mimicking portfolio method, our DDHP model considers the investors’ asymmetric attitudes towards upside and downside deviations between hedge portfolio returns and risk shocks. The cardinality and bound constraints are incorporated into the model, enhancing its adaptability to different investors’ requirements. Out-of-sample tests demonstrate that the DDHP model outperforms the mimicking portfolio approach, including better hedge effectiveness and investment performance. [ABSTRACT FROM AUTHOR]
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Databáze: Business Source Index
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Abstrakt:Climate transition risks, arising from the global shift towards a low-carbon economy, pose challenges for investors due to their long-term and systematic nature. We propose a new downside deviation hedge portfolio (DDHP) model to hedge against climate transition risks, which are measured through LDA-based text analysis of climate news. In contrast to the traditional mimicking portfolio method, our DDHP model considers the investors’ asymmetric attitudes towards upside and downside deviations between hedge portfolio returns and risk shocks. The cardinality and bound constraints are incorporated into the model, enhancing its adaptability to different investors’ requirements. Out-of-sample tests demonstrate that the DDHP model outperforms the mimicking portfolio approach, including better hedge effectiveness and investment performance. [ABSTRACT FROM AUTHOR]
ISSN:00036846
DOI:10.1080/00036846.2025.2583487