Why Climate Change Is Like a Robust Optimal Control Problem

How do we recognise climate change as a risk? Bob Litterman discusses asset allocation and climate change with Jason Mitchell.

Despite the systemic risk it poses, climate change still remains largely outside the scope of traditional financial and asset allocation models. Are incentives like a US carbon price the right answer? And how can markets formally treat climate change as a risk factor? Bob Litterman, co-inventor of the Black-Litterman Model, discusses all this and why climate change is like a flaming truck barrelling toward us.


Recording date: 20.09.2019


Robert Litterman

Robert Litterman is a founding partner of Kepos Capital and Chairman of its Risk Committee. He had a 23-year career at Goldman Sachs where he oversaw the Quantitative Investment Strategies Group in the Asset Management division. He is best known for his work alongside the late Fischer Black resulting in the development of the Black-Litterman Global Asset Allocation Model, a key tool in investment management. He is co-author The Practice of Risk Management and Modern Investment Management: An Equilibrium Approach. Inducted into Risk Magazine's Risk Management Hall of Fame, Bob also serves on the boards including the World Wildlife Fund, the Commonfund and Resources for the Future.


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