Model the probability of correct insolvency due to the risk of transition

News Financial services Reports

Date: 16th May, 2025 Source: Bank of Italy Country: Italy Original Source

Brief

On 16/05/2025, the Bank of Italy issued an update regarding "Model the probability of correct insolvency due to the risk of transition". The report introduces a novel methodology to estimate the impact of climate transition risk on the one-year default probability of Italian non-financial companies. Using stochastic simulations and extreme event analysis, the study generates scenarios evaluating the effect of EU-ETS emission costs on company balance sheets, showing improved creditworthiness for some firms.

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Bank of Italy

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Model the probability of correct insolvency due to the risk of transition

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Model the probability of correct insolvency due to the risk of transition

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Bank of Italy

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