This study aims to evaluate the techniques used for the validation of default probability (DP) models. By generating simulated stress data, we build ideal conditions to assess the adequacy of the metrics in different stress scenarios. In addition, we empirically analyze the evaluation metrics...

Transitioning to a low-carbon economy involves risks for the value of financial assets, with potential ramifications for financial stability. We quantify the systemic impact on financial firms arising from changes in the value of financial assets under three climate transition scenarios that...

We study whether the credit default swap (CDS) spreads of firms reflect the risk from climate transition. We first construct a climate transition risk (CTR) factor by using information on the vulnerability of a firm's value to the transition to a low-carbon economy. We then document how this...