This paper investigates whether climate policy event risks are priced ex ante in the options market. I show both theoretically and empirically that option prices increase with a firm’s absolute exposure to climate change, regardless of direction. I develop a model predicting a non-monotonic relationship between a firm’s exposure to a climate risk factor and its option-implied volatility difference, which compares option prices spanning a climate event to neighboring options. Using data from S&P 500 firms around the 2015 UN Climate Change Conference in Paris, I find that firms with greater absolute climate change exposure, measured by carbon emissions and textual sentiment, face significantly higher option prices before the event. I corroborate my findings using multiple events in panel regressions and a sample of European firms.  Following Liu et al. (2022), I find that option-implied risk premia prior to the Paris Agreement increase significantly with firms’ climate change exposure. My results reveal that option markets anticipate potential climate policy outcomes, pricing in uncertainty regardless of whether exposure is positive or negative.

This paper proposes a simple but effective tool to measure firms' exposure to climate risk: the market. We first develop a model showing that abnormal stock returns around significant climate policy events measure a firm's exposure to climate risk. On this basis, we create market-based greenness measures based on abnormal returns around UN climate conferences. Our measurement of climate risk covers around 36,000 international firms, a tenfold increase relative to existing measures. It is associated with lower present and future carbon emissions and provides explanatory power distinct from existing climate risk measures. Market-based green firms are also more likely to file green patents, have lower stock-price volatility, and tend to be financially more robust. At the country level, market-based greenness is associated with lower emission intensity and a larger share of renewable energy.

This paper investigates how monetary policy shocks propagate to asset prices via their impact on financial intermediaries. Based on high-frequency U.S. financial sector equity returns around FOMC announcements, we first document a striking reversal in the effects of monetary policy on intermediaries: while tightening surprises depressed financial sector stocks relative to the market prior to the Great Financial Crisis, they raised intermediary stock prices during the monetary policy normalization from 2013 to 2019, particularly for firms with lower net interest margins, higher risk and greater deposit dependence. We then document that intermediary announcement returns have strong predictive power for asset price changes around FOMC announcements – in particular for financial conditions and risk perceptions – and convey information beyond what is captured by common policy surprise measures and the reaction of the broad stock market. Our results illustrate that announcement returns of the U.S. financial sector constitute a concise, forward-looking measure of policy-induced shifts in financial sector health and highlight the role of intermediaries in shaping the risk-taking channel of monetary policy.

I use survey panel data of more than 10,000 individuals representative of the US population to gauge the financial impact of Long Covid on households. Using difference-in-difference analysis and propensity score matching I find that on average Long Covid leads to a reduction in working hours, annual income and for long-term cases stock and bond holdings. I fail to reject the null of no impact on employment status and overall wealth. My results add to the scarce literature showing that lasting health consequences caused by Covid-19 can have significant impact on an individual as well as aggregate economic level.