TITLE:
Asymmetric Effects of Climate Risk on Bank Stock Volatility: The Role of Market Sentiment in Global Systemically Important Banks
AUTHORS:
Thomas C. Chiang
KEYWORDS:
Climate Risk, Bank Stock Volatility, Transition Risk, Physical Risk, Market Sentiment
JOURNAL NAME:
Journal of Mathematical Finance,
Vol.16 No.4,
November
11,
2026
ABSTRACT: This paper examines the asymmetric effects of climate risk on bank stock volatility using data of ten major global banks. Findings are: first, macro-financial uncertainty is the driver of bank stock volatility. Second, a pronounced asymmetry presents in the climate risk-volatility relationship. Third, market sentiment plays a critical role in shaping these effects. Consumer confidence amplifies the volatility impact of transition risk but attenuates the effect of physical risk. Fourth, the covariance between investor sentiment and market volatility amplifies the impact of transition risk variance, while the corresponding interaction with consumer confidence dampens the effect of physical risk variance.