There is increasing interest in assessing the impact of climate policies on the value of financial sector assets, and consequently on financial stability. Prior studies either take a “black box” macro-modelling approach to climate stress testing or focus solely on equity instruments –...

The severe economic impact of the COVID-19 pandemic could threaten financial stability. However, assessing the gravity of this threat is challenging, since banks' accounting-based loan loss provisions are sluggish. We use a Merton contingent claims model to provide a real-time, market...

Climate change has become highly relevant for central banks, with new methods to assess the impact of climate-related shocks on the financial system developing rapidly. This paper analyzes the conceptual steps in Climate Risk Stress Testing (CRST), which is a tool to assess the impact of...