Climate change valuation adjustment using parameterised climate change impacts

A framework to incorporate climate change risk into derivative prices is presented


Chris Kenyon and Mourad Berrahoui introduce the climate change valuation adjustment to capture the climate change effects on CVA and FVA that are currently invisible in typical market practice

Climate change risk comprises physical, transition and liability risks to assets, companies and sovereign entities (Bank of England 2019; European Central Bank 2020). Credit valuation adjustment (CVA) quantifies expected loss on counterparty default (Green 2015; Basel

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