Climate-Extended Vasicek Model

Base PD

2.00%

Climate PD

2.630%

+31.5%

LGD₀

45%

LGD₁

57.2%

+27%

VaR Base

7.93%

VaR Climate

22.28%

Basel K

9.78%

Gap

+-21.0%

undercap.

Asset Return Distribution

Standard vs climate-shifted mixture

Portfolio Loss Density

Analytical closed-form density

Conditional Default Rate

PD | economy state S (left = recession)

Tail Risk Sensitivity

VaR 99.9% as climate probability varies

Model Inputs

Base PD2.00%Base LGD45%Correlation15%

Climate Prob5.0%Asset Damage25%Normalized dmg.1.000

Climate Impact

Default Probability+31%

2.00%

2.63%

PD₀PD

Loss Given Default+27%

45.0%

57.2%

LGD₀LGD₁

Risk Measures

VaR 99.9%

Baseline

7.93%

Climate

22.28%

Expected Loss

Baseline

0.900%

Climate

1.183%

Regulatory Gap

Basel Capital9.78%

Climate Capital7.72%

Undercapitalization+-21.0%

Multiplier: 1.014