Application of GEOVOL and CRISK to Climate Policy

Application of GEOVOL and CRISK to Climate Policy

The GEOVOL and CRISK concepts are very relevant for thinking about climate policies. Some of the results are a bit counterintuitive in that flash crash of August 2015 has a bigger impact on GEOVol than global financial crisis. Climate-related policy events, or weather-related events do not rank high in the top GEOvolatility events.
Overview

GEOVOL is a measure that captures the common variation in the innovation of volatility of assets. It has been monitored and measured by using the daily closing prices of up to 47 country ETFs.

CRISK is the expected capital shortfalls under climate stress risk. It is computed by calculating climate betas for large global banks, this is meant to capture the sensitivity of the equity prices of the existence of the excess returns of stranded asset portfolios.

Key learning objectives:

  • Understand the concept of GEOVOL

  • Understand the concept of CRISK

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Expert
Misa Tanaka

Misa Tanaka

Misa Tanaka is the Head of Research at the Bank of England, a position she has held since 2018. Misa joined the Bank of England in 2002 following the completion of her D. Phil in Economics at the University of Oxford. She has published articles on the likes of international policy spillovers, bonus regulations and sovereign debt finance. Misa’s current research interests include prudential policies and the impact of climate change on the financial system.

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