Risk-layering and optimal insurance uptake under ambiguity: With an application to farmers exposed to drought risk in Austria.

Many risks we face today will very likely not stay the same over time. For example, it is expected that climate change will alter future risks of natural disaster events considerably and, as a consequence, current risk management and governance strategies may not be effective anymore. Large ambiguities arise if future climate change impacts should be taken into account for analyzing risk management options today.

Mapping the effects of drought on child stunting.

As climate change continues, it is expected to have increasingly adverse impacts on child nutrition outcomes, and these impacts will be moderated by a variety of governmental, economic, infrastructural, and environmental factors. To date, attempts to map the vulnerability of food systems to climate change and drought have focused on mapping these factors but have not incorporated observations of historic climate shocks and nutrition outcomes. We significantly improve on these approaches by using over 580,000 observations of children from 53 countries to examine how precipitation extremes since 1990 have affected nutrition outcomes.

Traces of business cycles in credit-rating migrations.

Using migration data of a rating agency, this paper attempts to quantify the impact of macroeconomic conditions on credit-rating migrations. The migrations are modeled as a coupled Markov chain, where the macroeconomic factors are represented by unobserved tendency variables. In the simplest case, these binary random variables are static and credit-class-specific.

Dependency of Crop Production between Global Breadbaskets: A Copula Approach for the Assessment of Global and Regional Risk Pools.

As recent events have shown, simultaneous crop losses in different parts of the world can cause serious risks to global food security. However, to date, little is known about the spatial dependency of lower than expected crop yields from global breadbaskets. This especially applies in the case of extreme events, i.

Assessing water resource system vulnerability to unprecedented hydrological drought using copulas to characterize drought duration and deficit.

Global climate models suggest an increase in evapotranspiration, changing storm tracks, and moisture delivery in many parts of the world, which are likely to cause more prolonged and severe drought, yet the weakness of climate models in modeling persistence of hydroclimatic variables and the uncertainties associated with regional climate projections mean that impact assessments based on climate model output may underestimate the risk of multiyear droughts. In this paper, we propose a vulnerability-based approach to test water resource system response to drought. We generate a large number of synthetic streamflow series with different drought durations and deficits and use them as input to a water resource system model.

Structured Coupling of Probability Loss Distributions: Assessing Joint Flood Risk in Multiple River Basins.

Losses due to natural hazard events can be extraordinarily high and difficult to cope with. Therefore, there is considerable interest to estimate the potential impact of current and future extreme events at all scales in as much detail as possible. As hazards typically spread over wider areas, risk assessment must take into account interrelations between regions.

Refocusing disaster aid.

With new modeling techniques for estimating and pricing the risks of natural disasters, the donor community is now in a position to help the poor cope with the economic repercussions of disasters by assisting before they happen. Such assistance is possible with the advent of novel insurance instruments for transferring catastrophe risks to the global financial markets. Donor-supported risk-transfer programs not only would leverage limited disaster-aid budgets but also would free recipient countries from depending on the vagaries of postdisaster assistance.

Infrastructure in developing and transition countries: risk and protection.

This article examines two possible strategies for financing post-disaster infrastructure rehabilitation in developing and transition countries: relying on ex ante financing instruments (including insurance, catastrophe bonds, and other risk-transfer instruments) and ex post borrowing or credit. Insurance and other ex ante instruments will increase a country's stability, especially if the government authorities have a difficult time borrowing or otherwise raising funds after a major disaster; however, these instruments have an opportunity cost and can reduce the country's economic growth potential. The cost-benefit tradeoff is therefore one between economic growth through infrastructure investment and added solvency and stability for the economy.