IDEAS home Printed from https://ideas.repec.org/a/spt/apfiba/v9y2019i4f9_4_9.html
   My bibliography  Save this article

Study of endogenous and exogenous factors impact’s on the default probability of listed companies on the Casablanca Stock Exchange

Author

Listed:
  • Abdessamad TOUIMER
  • Lahsen OUBDI

Abstract

This paper aims to study the impact of endogenous and exogenous factors on the default probability through the structural approach (Internal Ratings-Based IRB). The study is conducted using data from listed companies on the Stock Exchange of Casablanca (BVMC); it covers the period from the beginning to the end of 2017. In this paper, we propose a numerical method, based on Monte Carlo simulation, to estimate the default probabilities using the Black & Scholes (1973) model. Our focus was on determining the most influential factors among the internal or external ones that impact the default probability of the listed non-financial companies on BVMC. JEL classification numbers: D81Keywords: Default probability, credit risk, IRB approach, Monte Carlo simulation.

Suggested Citation

  • Abdessamad TOUIMER & Lahsen OUBDI, 2019. "Study of endogenous and exogenous factors impact’s on the default probability of listed companies on the Casablanca Stock Exchange," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 9(4), pages 1-9.
    • Handle: RePEc:spt:apfiba:v:9:y:2019:i:4:f:9_4_9
    as

    Download full text from publisher

    File URL: http://www.scienpress.com/Upload/JAFB%2fVol%209_4_9.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Geske, Robert, 1977. "The Valuation of Corporate Liabilities as Compound Options," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 12(4), pages 541-552, November.
    2. Merton, Robert C, 1974. "On the Pricing of Corporate Debt: The Risk Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 29(2), pages 449-470, May.
    3. Goodhart, Charles A. E. & O'Hara, Maureen, 1997. "High frequency data in financial markets: Issues and applications," Journal of Empirical Finance, Elsevier, vol. 4(2-3), pages 73-114, June.
    4. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Augusto Castillo, 2004. "Firm and Corporate Bond Valuation: A Simulation Dynamic Programming Approach," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 41(124), pages 345-360.
    2. Eberhart, Allan C., 2005. "A comparison of Merton's option pricing model of corporate debt valuation to the use of book values," Journal of Corporate Finance, Elsevier, vol. 11(1-2), pages 401-426, March.
    3. Chen, An-Sing & Chu, Hsiang-Hui & Hung, Pi-Hsia & Cheng, Miao-Sih, 2020. "Financial risk and acquirers' stockholder wealth in mergers and acquisitions," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).
    4. Edward J. Elton & Martin J. Gruber & Deepak Agrawal & Christopher Mann, 1999. "Explaining the Rate Spread on Corporate Bonds," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-082, New York University, Leonard N. Stern School of Business-.
    5. Giesecke, Kay & Longstaff, Francis A. & Schaefer, Stephen & Strebulaev, Ilya, 2011. "Corporate bond default risk: A 150-year perspective," Journal of Financial Economics, Elsevier, vol. 102(2), pages 233-250.
    6. Robert L. Brown & Dominique Achour, 1984. "The Pricing of Land Options," Urban Studies, Urban Studies Journal Limited, vol. 21(3), pages 317-323, August.
    7. Duffie, Darrell, 2005. "Credit risk modeling with affine processes," Journal of Banking & Finance, Elsevier, vol. 29(11), pages 2751-2802, November.
    8. Samuel Chege Maina, 2011. "Credit Risk Modelling in Markovian HJM Term Structure Class of Models with Stochastic Volatility," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 1-2011.
    9. Eichler, Stefan & Karmann, Alexander & Maltritz, Dominik, 2011. "The term structure of banking crisis risk in the United States: A market data based compound option approach," Journal of Banking & Finance, Elsevier, vol. 35(4), pages 876-885, April.
    10. Maclachlan, Iain C, 2007. "An empirical study of corporate bond pricing with unobserved capital structure dynamics," MPRA Paper 28416, University Library of Munich, Germany.
    11. Abel Elizalde, 2006. "Credit Risk Models II: Structural Models," Working Papers wp2006_0606, CEMFI.
    12. Peter Reichling & Anastasiia Zbandut, 2017. "Costs of capital under credit risk," FEMM Working Papers 170003, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    13. Maria Carmen Badia Batlle & M. Mercedes Galisteo Rodriguez & M. Teresa Preixens Benedicto, 2006. "Un modelo de riesgo de credito basado en opciones compuestas con barrera. Aplicacion al mercado continuo espanol," Working Papers in Economics 156, Universitat de Barcelona. Espai de Recerca en Economia.
    14. Duffie, Darrell, 2003. "Intertemporal asset pricing theory," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 11, pages 639-742, Elsevier.
    15. Karmann, Alexander & Maltritz, Dominik, 2003. "Sovereign risk in a structural approach: Evaluating sovereign ability-to-pay and probability of default," Dresden Discussion Paper Series in Economics 07/03, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
    16. Sanjiv Ranjan Das & Rangarajan K. Sundaram, 1998. "A Direct Approach to Arbitrage-Free Pricing of Derivatives," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-013, New York University, Leonard N. Stern School of Business-.
    17. International Association of Deposit Insurers, 2011. "Evaluation of Deposit Insurance Fund Sufficiency on the Basis of Risk Analysis," IADI Research Papers 11-11, International Association of Deposit Insurers.
    18. Duffee, Gregory R., 1996. "On measuring credit risks of derivative instruments," Journal of Banking & Finance, Elsevier, vol. 20(5), pages 805-833, June.
    19. Hann-Shing Ju & Ren-Raw Chen & Shih-Kuo Yeh & Tung-Hsiao Yang, 2015. "Evaluation of conducting capital structure arbitrage using the multi-period extended Geske–Johnson model," Review of Quantitative Finance and Accounting, Springer, vol. 44(1), pages 89-111, January.
    20. Eichler, Stefan & Karmann, Alexander & Maltritz, Dominik, 2010. "Deriving the term structure of banking crisis risk with a compound option approach: The case of Kazakhstan," Discussion Paper Series 2: Banking and Financial Studies 2010,01, Deutsche Bundesbank.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spt:apfiba:v:9:y:2019:i:4:f:9_4_9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Eleftherios Spyromitros-Xioufis (email available below). General contact details of provider: http://www.scienpress.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.