Related papers: The Climate Extended Risk Model (CERM)
The PCL framework provides a comprehensive climate risk management approach grounded in the assessment of societal values of financial and non-financial loss tolerability. The framework optimizes response action across three main clusters,…
This paper outlines a critical gap in the assessment methodology used to estimate the macroeconomic costs and benefits of climate policy. It shows that the vast majority of models used for assessing climate policy use assumptions about the…
The instability of the financial system as experienced in recent years and in previous periods is often linked to credit defaults, i.e., to the failure of obligors to make promised payments. Given the large number of credit contracts, this…
The issue of model risk in default modeling has been known since inception of the Academic literature in the field. However, a rigorous treatment requires a description of all the possible models, and a measure of the distance between a…
In the global economy, credit companies play a central role in economic development, through their activity as money lenders. This important task comes with some drawbacks, mainly the risk of the debtors not being able to repay the provided…
Most risk analysis models systematically underestimate the probability and impact of catastrophic events (e.g., economic crises, natural disasters, and terrorism) by not taking into account interconnectivity and interdependence of risks. To…
The risk of a credit portfolio depends crucially on correlations between the probability of default (PD) in different economic sectors. Often, PD correlations have to be estimated from relatively short time series of default rates, and the…
We study how the climate transition through a low-carbon economy, implemented by carbon pricing, propagates in a credit portfolio and precisely describe how carbon price dynamics affects credit risk measures such as probability of default,…
Energy system models underpin decisions by energy system planners and operators. Energy system modelling faces a transformation: accounting for changing meteorological conditions imposed by climate change. To enable that transformation, a…
We propose an index to quantify and analyse the impact of climatological variability on the energy system at different timescales. We define the Climatological Renewable Energy Deviation Index (CREDI) as the cumulative anomaly of a…
Climate models are essential for assessing the impact of greenhouse gas emissions on our changing climate and the resulting increase in the frequency and severity of natural disasters. Despite the widespread acceptance of climate models…
We propose a credit risk model for portfolios composed of green and brown loans, extending the ASRF framework via a two-factor copula structure. Systematic risk is modeled using potentially skewed distributions, allowing for asymmetric…
Environmentally-powered computer systems operate on renewable energy harvested from their environment, such as solar or wind, and stored in batteries. While harvesting environmental energy has long been necessary for small-scale embedded…
As renewable energy is becoming the major resource in future grids, the weather and climate can have a higher impact on grid reliability. Transmission expansion planning (TEP) has the potential to reinforce a transmission network that is…
Climate models play a crucial role in understanding the effect of environmental and man-made changes on climate to help mitigate climate risks and inform governmental decisions. Large global climate models such as the Community Earth System…
The document provides an overview of financial climate risks. It delves into how climate change impacts the global financial system, distinguishing between physical risks (such as extreme weather events) and transition risks (stemming from…
We introduce an equilibrium asset pricing model, which we build on the relationship between a novel risk measure, the Expected Downside Risk (EDR) and the expected return. On the one hand, our proposed risk measure uses a nonparametric…
The application of models to assess the risk of the physical impacts of weather and climate and their subsequent consequences for society and business is of the utmost importance in our changing climate. The operation of such models is…
Carbon credits are a key component of most national and organizational climate strategies. Financing and delivering carbon credits from forest-related activities faces multiple risks at the project and asset levels. Financial mechanisms are…
Climate change is one of the most critical challenges that our planet is facing today. Rising global temperatures are already bringing noticeable changes to Earth's weather and climate patterns with an increased frequency of unpredictable…