Weather risk, amplified by climate change, is posing an increasingly severe threat to agricultural production. Index insurance is a promising tool to hedge against weather risk, but traditional contracts face key limitations. Tapping into recent advances in machine learning, HKUST’s Zhanhui Chen and colleagues introduce a novel method of managing weather ... Read More

Climate change and weather risk affect economy and livelihood over large scales, especially for agricultural production which depends on weather conditions. For example, United States Department of Agriculture estimates that 70-90\% of agricultural production loss can be attributed to adverse weather. In practice, weather index insurance can be employed to ... Read More

The interest rate charged on business loans, known as the discount rate, affects stock prices. This is particularly important, given the fast rate increases by the Federal Reserve this year. However, traditional methods of calculating its impact are not sophisticated enough, according to HKUST’s Zhanhui Chen. To address this limitation, the researcher ... Read More

Real business cycle (RBC) models describe how firms make investment and labour decisions. They assume that technological shocks and changes in productivity are the primary drivers of macroeconomic fluctuations. However, these models generally fall short of explaining how choices made within firms—which might modify external shocks—might affect macroeconomic ... Read More

In general, people lived longer than expected in the last century, largely as a result of economic development and improvements in healthcare. Nevertheless, changes in life expectancy can be rather volatile, with negative shocks occurring from economic recessions, epidemics, natural disasters, wars, and social and political disturbances. In the United States ... Read More

Climate change threatens human societies with long-term catastrophic consequences. These threats must be addressed immediately. A delayed response to climate change will lead to further deterioration and a greater chance of irreversible and catastrophic damage. In this article, we discuss the possibility of using weather derivatives to manage climate ... Read More