 Regulatory yield curves and climate-related scenariosFulvio Pegoraro Chapter 26 in Handbook of Climate Change and Financial Markets, 2026, pp 589-611 from Edward Elgar Publishing Abstract: The purpose of this chapter is to evaluate the impact of high-level long-term reference scenarios of the Network for Greening the Financial System (NGFS) on the EIOPA regulatory risk-free yield curve of the Euro Area (EA). The impact of the selected climate-related scenarios, including both physical and transition risks, is assessed with respect to a baseline scenario (excluding those climate-related risks) and is obtained by means of the following modeling strategy. First, we estimate a Gaussian macro-finance affine term structure model (MTSM) on the liquid segment of the EA EIOPA risk-free yield curve, together with two EA macroeconomic variables (GDP growth and inflation rate). Second, for any relevant scenario, we calculate the conditional forecast of this (liquid segment of the) yield curve, conditionally to the scenario-based future path of the two macroeconomic variables. Third, any yield curve forecast (conditionally to the chosen scenario) is extrapolated, from the last liquid maturity to the longest maturity provided by the EIOPA, by means of the required Smith–Wilson function. Keywords: Regulatory yield curves; Climate-related scenarios; Smith–Wilson function; Gaussian macro-finance affine term structure models; Conditional forecasts (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:elg:eechap:23637_26 Ordering information: This item can be ordered from Access Statistics for this chapter More chapters in Chapters from Edward Elgar Publishing |
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