A1089
Title: The greenium term structure
Authors: Lorenzo Mercuri - University of Milan (Italy)
Ilaria stefani - University of Milano-Bicocca (Italy)
Edit Rroji - Universita' degli studi di Milano-Bicocca (Italy) [presenting]
Abstract: Green bonds provide financial backing for low-carbon initiatives and facilitate the transition towards a greener economy. The greenium effect refers to the potential premium bondholders are willing to pay to invest in green securities compared to investments with similar characteristics such as maturity, coupon rate, and issuer credit profile. Despite the interest of recent literature on this topic, the determinants and dynamics of the greenium effect remain inadequately understood, particularly concerning its term structure and geographical dependencies. A mathematical framework is proposed, employing an autoregressive model where the error term is conditionally gamma-distributed. Leveraging likelihood estimation techniques and market bond prices, the methodology aims to establish a comprehensive framework for the term structure of the greenium effect.
