Financial Instruments for Mitigation of Flood Risks: The Case of Florence

Fabio Castelli, Marcello Galeotti, Giovanni Rabitti

Research output: Contribution to journalArticlepeer-review

5 Citations (Scopus)


This article analyzes the mechanisms and effects of innovative financial instruments that a central public administration (CPA) may adopt to minimize the flood risk in particularly exposed regions. The pattern we suggest assumes that in risky areas the CPA can issue two financial instruments, called project options and CAT‐bonds, producing a dynamic interaction among three types of agents: the CPA itself, the local public administrations, and private investors. We explore the possible scenarios of such interaction and the conditions under which the CPA's goal of maximal risk reduction is attained. This pattern is proposed for flood risk mitigation in the city of Florence, where the model dynamics are tested assuming parameters obtained from engineering studies.
Original languageEnglish
Pages (from-to)462-472
Number of pages11
JournalRisk Analysis
Issue number2
Early online date17 Aug 2018
Publication statusPublished - Feb 2019


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