Skip to main content
Disciplines
Automotive Business IT + Informatics Construction + Real Estate Electrical Engineering + Electronics Energy + Sustainability Insurance + Risk Finance + Banking Management + Leadership Marketing + Sales Mechanical Engineering + Materials
Events
DE
EN
Books
Journals
Topic Page
Marketing
Start single access now
Access for companies
EXTENDED SEARCH
Log in
Top
Published in:
Estimation of the Number of Factors in a Multi-Factorial Heath-Jarrow-Morton Model in Power Markets Read chapter Read first chapter

2024 | OriginalPaper | Chapter

Climate Risk in Structural Credit Models

Authors : Alexander Blasberg, Rüdiger Kiesel

Published in: Quantitative Energy Finance

Publisher: Springer Nature Switzerland

Log in

Activate our intelligent search to find suitable subject content or patents.

search-config
loading …

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.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

  • über 102.000 Bücher
  • über 537 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Maschinenbau + Werkstoffe
  • Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Springer Professional "Technik"

Online-Abonnement

Mit Springer Professional "Technik" erhalten Sie Zugriff auf:

  • über 67.000 Bücher
  • über 390 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Maschinenbau + Werkstoffe




 

Jetzt Wissensvorsprung sichern!

inform now

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

  • über 67.000 Bücher
  • über 340 Zeitschriften

aus folgenden Fachgebieten:

  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Versicherung + Risiko




Jetzt Wissensvorsprung sichern!

inform now
previous chapter PPA Investments of Minimal Variability
Footnotes
1
Equation (5) is obtained by applying Itô’s formula to obtain the stock price dynamics.
 
2
An alternative is to use the double-exponential distribution advocated by Kou and Wang [22].
 
3
These models build on [25] and require the calculation of various functionals of Brownian motion.
 
4
The distance-to-default is a measure based on the relation of the value process and the default boundary and widely used in variants of the Merton model, see [19] for further discussion.
 
5
Using the EBITDA relies on the assumption that the proportionality to the firm value stays constant over time.
 
Literature
1.
Rajhi, W., Albuquerque, P.: Banking stability, natural disasters, and political conflicts: time series evidence on causality in developing countries. Economics Discussion Papers (2017)
2.
Kölbel, J., Leippold, M., Rillaerts, J., Wang, Q. Ask BERT: How Regulatory Disclosure of Transition and Physical Climate Risks affects the CDS Term Structure. J. Financ. Econ. Forthcoming (2022)
3.
Bats, J., Bua, G., Kapp, D.: Physical and transition risk premiums in Euro area corporate bond markets. SSRN (2023)
4.
Kleimeier, S., Viehs, M.: Carbon disclosure, emission levels, and the cost of debt. SSRN (2018)
5.
Jung, J., Herbohn, K., Clarkson, P.: Carbon risk, carbon risk awareness and the cost of debt financing. J. Bus. Ethics 150(4), 1151–1171 (2018)CrossRef
6.
Delis, M., de Greiff, K., Ongena, S.: Being stranded on the carbon bubble? Climate policy risk and the pricing of bank loans. Swiss Finance Institute Research Paper Series (2018)
7.
Duan, T., Li, F.W., Wen, Q. Is Carbon Risk Priced in the Cross-Section of Corporate Bond Returns?. J. Financ. Quant. Anal. 1–35 (2023)
8.
Seltzer, L., Starks, L.T., Zhu, Q.: Climate regulatory risks and corporate bonds. SSRN (2022)
9.
Capasso, G., Gianfrate, G., Spinelli, M.: Climate change and credit risk. J. Clean. Product. 266, 121634 (2020)CrossRef
10.
Ilhan, E., Sautner, Z., Vilkov, G.: Carbon tail risk. Rev. Financ. Stud. 34(3), 1540–1571 (2020)CrossRef
11.
Barth, F., Hübel, B., Scholz, H.: ESG and corporate credit spreads. J. Risk Financ. 23(2), 169–190 (2022)CrossRef
12.
Christ, J., Hertel, T., Zhao, R.: Corporate sustainability performance and the cost of debt – an analysis of the impact of country- and industry-specific climate risk exposures. SSRN (2022)
13.
Blasberg, A., Kiesel, R., Taschini, L.: Carbon default swap – disentangling the exposure to carbon risk through CDS. SSRN (2022)
14.
Bouchet, V., Le Guenedal, T.: Credit risk sensitivity to carbon price. SSRN (2020)
15.
Reinders, H.J., Schoenmaker, D., van Dijk, M.: A finance approach to climate stress testing. J. Int. Money Financ. 131, 102797 (2023)CrossRef
16.
Agliardi, E., Agliardi, R.: Pricing climate-related risks in the bond market. J. Financ. Stabil. 54, 100868 (2021)CrossRef
17.
Le Guenedal, T., Tankov, P.: Corporate debt value under transition scenario uncertainty. SSRN (2020)
18.
Bielecki, T.R., Rutkowski, M.: Credit Risk: Modeling, Valuation and Hedging. Springer Finance. Springer, Berlin (2004)
19.
Lando, D.: Credit Risk Modeling. Princeton University Press, Princeton (2004)CrossRef
20.
Merton, R.: On the pricing of corporate debt: the risk structure of interest rates. J. Financ. 29(2), 449–470 (1974)
21.
Zhou, C.: The term structure of credit spreads with jump risk. J. Bank. Financ. 25(11), 2015–2040 (2001)CrossRef
22.
Kou, S., Wang, H.: Option pricing under a double exponential jump diffusion model. Manag. Sci. 50(9), 1178–1192 (2004)CrossRef
23.
Leland, H.E.: Corporate debt value, bond covenants, and optimal capital structure. J. Financ. 49(4), 1213–1252 (1994)CrossRef
24.
Leland, H.E., Toft, K.B.: Optimal capital structure, endogenous bankruptcy, and the term structure of credit spreads. J. Financ. 51(3), 987–1019 (1996)CrossRef
25.
Black, F., Cox, J.C.: Valuing corporate securities: some effects of bond indenture provisions. J. Financ. 31(2), 351–367 (1976)CrossRef
26.
Sautner, Z., Van Lent, L., Vilkov, G., Zhang, R.: Firm-level climate change exposure. J. Financ. 78(3), 1449–1498 (2023)CrossRef
Metadata
Title
Climate Risk in Structural Credit Models
Authors
Alexander Blasberg
Rüdiger Kiesel
Copyright Year
2024
Book
Quantitative Energy Finance

Print ISBN: 978-3-031-50596-6

Electronic ISBN: 978-3-031-50597-3

Copyright Year: 2024

DOI
https://doi.org/10.1007/978-3-031-50597-3_7