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Distance to Default Estimates for Romanian Listed Companies

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Author Info

  • Alina Sima (Grigore)

    (Academia de Studii Economice / Facultatea de Finante, Asigurari, Banci si Burse de Valori)

  • Alin Sima

    (Academia de Studii Economice / Facultatea de Finante, Asigurari, Banci si Burse de Valori)

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    Abstract

    This paper assesses the evolution of the distance to default during the recent crisis for some of the most traded companies on Bucharest Stock Exchange.The distance to default is formulated under the framework of the structural model of Leland (1994b) where the default threshold is endogenously determined. This model is reformulated as a (non-linear) state - space model where the (unobservable) state variable is the distance to default. After reviewing different methods proposed in the literature for estimation of the structural models, we estimate the model's parameters within the Bayesian approach with Markov Chain Monte Carlo (MCMC) methods.

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    Bibliographic Info

    Article provided by Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante in its journal The Review of Finance and Banking.

    Volume (Year): 03 (2011)
    Issue (Month): 2 (December)
    Pages: 091-106

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    Handle: RePEc:rfb:journl:v:03:y:2011:i:2:p:091-106

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    1. Jan Ericsson, 2005. "Estimating Structural Bond Pricing Models," The Journal of Business, University of Chicago Press, vol. 78(2), pages 707-735, March.
    2. Jones, E Philip & Mason, Scott P & Rosenfeld, Eric, 1984. " Contingent Claims Analysis of Corporate Capital Structures: An Empirical Investigation," Journal of Finance, American Finance Association, vol. 39(3), pages 611-25, July.
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    14. Anderson, Ronald & Sundaresan, Suresh, 2000. "A comparative study of structural models of corporate bond yields: An exploratory investigation," Journal of Banking & Finance, Elsevier, vol. 24(1-2), pages 255-269, January.
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