Dear all,



The Vega Institute Foundation invites you to join the meeting of the Global Seminar.



When: September 21, Saturday, 13:00 Moscow time



Speaker: Pavel Shevchenko (Macquarie University, Australia)



Topic: Solving stochastic dynamic integrated climate-economy models



Abstract: The classical dynamic integrated climate-economy (DICE) model has become the iconic typical reference point for the joint modelling of economic and climate systems, where all six model state variables (including carbon concentration, temperature, and economic capital) evolve over time deterministically and are affected by two controls (carbon emission mitigation rate and consumption). We consider the DICE model with stochastic shocks in various parts of the model and solve it under several scenarios as an optimal stochastic control problem to find the optimal policies in the presence of uncertainty. In the case of many stochastic shocks, to solve the problem we develop the least squares Monte Carlo (LSMC) method - a popular simulation method for solving optimal stochastic control problems in quantitative finance. To address the complexity and high dimensionality of the model, we incorporate deep neural network approximations in place of standard regression techniques within the LSMC framework.



This talk is based on the following papers:
1. A. Arandjelović, P.V. Shevchenko, T. Matsui, D. Murakami, T.A. Myrvoll (2024). Solving stochastic climate-economy models: A deep least-squares Monte
Carlo approach. http://arxiv.org/abs/2408.09642
2. P.V. Shevchenko, D. Murakami, T. Matsui, T.A. Myrvoll (2022). Impact of COVID-19 type events on the economy and climate under the stochastic DICE model. Environmental Economics and Policy Studies 24, 459-476. https://ssrn.com/abstract=3954108.



Format: online