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The Climate Extended Risk Model (CERM)

Author

Listed:
  • Josselin Garnier
  • Jean-Baptiste Gaudemet
  • Anne Gruz

Abstract

This paper addresses estimates of climate risk embedded within a bank credit portfolio. The proposed Climate Extended Risk Model (CERM) adapts well known credit risk models and makes it possible to calculate incremental credit losses on a loan portfolio that are rooted into physical and transition risks. The paper provides detailed description of the model hypotheses and steps.

Suggested Citation

  • Josselin Garnier & Jean-Baptiste Gaudemet & Anne Gruz, 2021. "The Climate Extended Risk Model (CERM)," Papers 2103.03275, arXiv.org, revised Apr 2022.
    • Handle: RePEc:arx:papers:2103.03275
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    File URL: http://arxiv.org/pdf/2103.03275
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    References listed on IDEAS

    as
    1. Merton, Robert C, 1974. "On the Pricing of Corporate Debt: The Risk Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 29(2), pages 449-470, May.
    2. Gordy, Michael B., 2003. "A risk-factor model foundation for ratings-based bank capital rules," Journal of Financial Intermediation, Elsevier, vol. 12(3), pages 199-232, July.
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    Cited by:

    1. Florian Bourgey & Emmanuel Gobet & Ying Jiao, 2022. "Bridging socioeconomic pathways of CO2 emission and credit risk," Working Papers hal-03458299, HAL.

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