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Managing Climate Risk in Mortgage Markets: A Role for Derivatives

Abstract: The world’s communities and economies are already feeling significant effects from global warming and related climate and extreme weather events, as the latest United Nations Intergovernmental Panel on Climate Change (IPCC) world climate report published in August 2021 makes clear. In some industry sectors, such as insurance and energy, financial market tools have been developed specifically to mitigate the risk of financial loss related to climate. Such tools have yet to be developed for the U.S. mortgage market—one of the world’s largest at roughly $11 trillion as of the end of 2020.

Keywords: Financial Economics;

JEL Classification: G12; G15; G21; Q54;

Bibliographic Information

Provider: Federal Reserve Bank of Chicago

Part of Series: Chicago Fed Letter

Publication Date: 2021-10-01

Issue: 462

Pages: 6