Climate Risk in Structural Credit Models

Alexander Blasberg () and Rüdiger Kiesel ()
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Alexander Blasberg: University of Duisburg-Essen
Rüdiger Kiesel: University of Duisburg-Essen

A chapter in Quantitative Energy Finance, 2024, pp 247-267 from Springer

Abstract: Abstract This survey article reviews the current state of literature on how structural models of credit risk are employed to model the impact of climate risk on financial markets. We discuss how the two prominent types of climate risk, physical and transition risk, are captured by the seminal Merton model and its well-known extensions. Theoretical and practical advantages and drawbacks are worked out and an outlook on possible model improvements is provided.

Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-50597-3_7

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DOI: 10.1007/978-3-031-50597-3_7

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