International Workshop on Sustainable Financeand Related Issues
July 6, 2024
July 7, 2024

(Sat)
(Sun)

9:30–17:30
10:00–16:30

Hotel Oacity Kyowa in Miyakojima, Okinawa, JapanSpeakers
Takanori Adachi
Tokyo Metropolitan University
Hiroshi Ishijima
Chuo University
Rusudan Kevkhishvili Kyoto University
Katsushi Nakajima
Ritsumeikan Asia Paciﬁc University
Tomonori Nakatsu
Shibaura Institute of Technology
Makoto Shimoshimizu Tokyo University of Science
Yong Hyun Shin
Sookmyung Women’s University
Ester Trutwin
University of Zurich and Swiss Finance InstituteScientiﬁc Committee
Takanori Adachi
Tokyo Metropolitan University
Chiaki Hara
Kyoto UniversityTomonori Uchiyama Tokyo Metropolitan University
Kyoko Yagi
Tokyo Metropolitan University

Organized by Institute of Economic Research, Kyoto University,
Research Center for Quantitative Finance, Tokyo Metropolitan University.

July 6 (Sat)9:30–9:45

Opening address by Tomonori Uchiyama, Director of Research Center for
Quantitative Finance, Tokyo Metropolitan University

Session 1 Chair: Kohta Takehara, Tokyo Metropplotan University
9:45–10:30 Hiroshi Ishijima
Chuo University“A Note on ESG CAPM and Factor Models”
10:30–11:15

Ester Trutwin
University of Zurich and Swiss Finance Institute“Modelling Sustainable Investing in the CAPM”

11:15–12:00

Takanori AdachiTokyo Metropolitan University“Time Series Data Generation by Linear Response Model”

Session 2 Chair: Teruyoshi Suzuki, Hokkaido University
13:30–14:15 Yong Hyun Shin
Sookmyung Women’s University“Living Standard and Psychological-Wealth-Based Optimal Consumption
and Investment Policies”
14:15–15:00

Katsushi Nakajima
Ritsumeikan Asia Paciﬁc University“Equilibrium with Heterogeneous Information and Beliefs”

Session 3 Chair: Tomooki Yuasa, Tokyo Metropolitan University
15:15–16:00 Makoto Shimoshimizu Tokyo University of Science“Brokerage Commissions in an Uncertain Stock Market”
16:00–16:45

Rusudan Kevkhishvili Kyoto University“Post-Last Exit Time Process and its Application to Loss-Given-DefaultDistribution”

16:45–17:30

Tomonori Nakatsu
Shibaura Institute of Technology“Computation of Greeks for Barrier Options in Some Diﬀusion Models”

July 7 (Sun)10:00–16:30

Reports and discussions on recent developments on the sustainable ﬁnance

16:30–16:45

Closing address by Kyoko Yagi, Tokyo Metropolitan University

July 6, 9:45–10:30

A Note on ESG CAPM and Factor Models
Hiroshi Ishijima
The Chuo Law School, Chuo University

Global eﬀorts to achieve net-zero carbon emissions by 2050 and mitigate climate change areintensively driven by capital market functions, including ESG investing. In this context, we aredeveloping several versions of asset pricing models for ESG investing. Our models represent an
important concept called the ”double bottom line” for ESG investing. Therefore, this study
serves as a foundation for empirical research to show whether or not ESG investing allows us
to achieve a double bottom line.

July 6, 10:30–11:15

Modelling Sustainable Investing in the CAPM
Ester Trutwin
University of Zurich and Swiss Finance InstituteEmpirical studies investigate various causes and eﬀects of sustainable investments. While someattempts have been made to describe the results found by theoretical models, these are relatively
complex and heterogeneous. We relate to existing studies and use a parsimonious Capital
Asset Pricing Model (CAPM) in which we model diﬀerent aspects of sustainable investing.
The basic reasoning of the CAPM, that investors need to be compensated for the bad aspectsof assets applies so that investors demand higher returns for investments that are harmful
from an environmental, social, and governance (ESG) perspective. Moreover, if investors haveheterogeneous views on the ESG–characteristics of a company, the market requires higher
returns for that company, provided richer investors care more about ESG than poorer investors,
which is known as the Environmental Kuznets Curve (EKC). Besides the eﬀect on asset prices,
we ﬁnd that sustainable investing has an impact on a ﬁrm s production decision through twochannels – the growth and the reform channel. Sustainable investment reduces the size of dirty
ﬁrms through the growth channel and makes ﬁrms cleaner through the reform channel. Weillustrate the magnitude of these eﬀects with numerical examples calibrated to real–world data,
providing a clear indication of the high economic relevance of the eﬀects.

July 6, 11:15–12:00

Time Series Data Generation by Linear Response Model
Takanori Adachi
Tokyo Metropolitan University

We propose a new method for generating virtual time series data based on linear response theory(LRT). Using the LRT, we can obtain an approximate representation of the transition fromthe current equilibrium state to another equilibrium state by adding second-order ﬂuctuationin the current equilibrium state and external forces (stresses). In other words, if the externalforce can be estimated in advance, we shall be able to obtain virtual time series data under
external forces. As an application, we examined whether this method is eﬀective with data
augmentation of the stock prediction model using external forces estimated by historical data.
As a result, the accuracy of stock price predictions was improved over the case without data
augmentation.

July 6, 13:30–14:15

Living Standard and Psychological-Wealth-Based
Optimal Consumption and Investment Policies
Yong Hyun Shin
Sookmyung Women’s University

We study optimal, dynamic consumption and portfolio policies of utility maximizing agents
who must maintain a living standard. We show that maintaining the minimum standardof living allows agents to endogenize a certain wealth threshold, which we call psychologicalwealth, below which they optimally choose to consume nothing. Psychological-wealth-based(PWB) agents then ﬁnd it optimal to increase consumption signiﬁcantly once they accumulate
assets above psychological wealth. The PWB model, thus, better matches empirical marginal
propensities to consume numbers. Interestingly, psychological wealth tends to reduce agents’eﬀective risk aversion, thus increasing their risk taking on the stock market.

July 6, 14:15–15:00

Equilibrium with Heterogeneous Information and Beliefs
Katsushi Nakajima
Ritsumeikan Asia Paciﬁc University

This paper proposes a general equilibrium model which assumes agents with heterogeneous information and beliefs. We introduce agents whose event-trees are diﬀerent from each other. The
classical general equilibrium is deﬁned. We then show the condition for the general equilibrium
to exist.

July 6, 15:15–16:00

Brokerage Commissions in an Uncertain Stock Market
Makoto Shimoshimizu
Tokyo University of Science

This study theoretically and empirically investigates how Knightian uncertainty about stock returns inﬂuences brokerage commissions via investors’ stock demand. We model a stock market
wherein oligopolistic brokers mediate ﬁnancial transactions among uncertainty-averse investors.
We ﬁnd that a deterioration of fundamentals about stock returns reduces the equilibrium commission, whereas an increased uncertainty raises it. Based on panel data for Canada, Japan,the United Kingdom, and the United States from 2010:Q4 to 2021:Q4, we present empiricalresults that support our theoretical ﬁndings.

July 6, 16:00–16:45

Post-Last Exit Time Process and its Application toLoss-Given-Default Distribution
Masahiko Egami and Rusudan Kevkhishvili
Kyoto University

We study a linear diﬀusion process after its last exit time from a certain regular point. Ratherthan treating the process as newly born at the last exit time, we view the whole path andseparate the original process before and after the last exit time. This enables us not only toidentify the transition semigroup, boundary behavior, entrance law, and reverse of the post-lastexit time process, but also to establish a ﬁnancial model for estimating the loss-given-default
distribution of corporate debt (an all-time important open problem).

July 6, 16:45–17:30

Computation of Greeks for Barrier Options in SomeDiﬀusion Models
Tomonori Nakatsu
Shibaura Institute of Technology

In this talk, we obtain formulas to compute the Greeks for barrier options. In particular,
we generalize the results in Gobet and Kohatsu-Higa (Electron. Comm. Probab., 2003) andNakatsu (J. Comput. Finance, 2017). Some numerical results will also be shown.