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Measuring Distance-to-Default for Financial and Non-Financial Firms

In: Global Credit Review

Author

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  • Jin-Chuan Duan

    (Risk Management Institute & Department of Finance, National University of Singapore, Singapore)

  • Tao Wang

    (Department of Finance, National University of Singapore, Singapore)

Abstract

The following sections are included:INTRODUCTIONTHE DISTANCE-TO-DEFAULTESTIMATION METHODSThe Market Value Proxy MethodThe Volatility Restriction MethodThe KMV MethodThe Transformed-Data Maximum Likelihood Estimation MethodOther Liabilities and the Transformed-Data MLE Estimation MethodCONCLUSIONNOTESREFERENCES

Suggested Citation

  • Jin-Chuan Duan & Tao Wang, 2012. "Measuring Distance-to-Default for Financial and Non-Financial Firms," World Scientific Book Chapters, in: Risk Management Institute, Singapore (ed.), Global Credit Review, chapter 6, pages 95-108, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814412643_0006
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    Cited by:

    1. Turalay Kenc & Emrah Ismail Cevik & Sel Dibooglu, 2021. "Bank default indicators with volatility clustering," Annals of Finance, Springer, vol. 17(1), pages 127-151, March.
    2. László Békési & Lorant Kaszab & Szabolcs Szentmihályi, 2017. "The EAGLE model for Hungary - a global perspective," MNB Working Papers 2017/7, Magyar Nemzeti Bank (Central Bank of Hungary).
    3. Srivastava, Jagriti & Gopalakrishnan, Balagopal, 2021. "In-kind financing during a pandemic: Trade credit and COVID-19," MPRA Paper 111433, University Library of Munich, Germany, revised Dec 2021.
    4. Marra, Miriam, 2015. "The impact of liquidity on senior credit index spreads during the subprime crisis," International Review of Financial Analysis, Elsevier, vol. 37(C), pages 148-167.
    5. Abinzano, Isabel & Corredor, Pilar & Mansilla-Fernández, José Manuel, 2022. "Sovereign debt holdings and banks’ credit risk: Evidence from the Eurozone," Finance Research Letters, Elsevier, vol. 47(PA).
    6. Shin, Dongheon & Kim, Baeho, 2015. "Liquidity and credit risk before and after the global financial crisis: Evidence from the Korean corporate bond market," Pacific-Basin Finance Journal, Elsevier, vol. 33(C), pages 38-61.
    7. Martin Indergand & Eric Jondeau & Andreas Fuster, 2022. "Measuring and Stress-Testing Market-Implied Bank Capital," Swiss Finance Institute Research Paper Series 22-11, Swiss Finance Institute.
    8. Zhang, Xuan & Zhao, Yang & Yao, Xiao, 2022. "Forecasting corporate default risk in China," International Journal of Forecasting, Elsevier, vol. 38(3), pages 1054-1070.
    9. RMI staff article, 2016. "NUS-RMI Credit Research Initiative Technical Report Version: 2016 Update 1," Global Credit Review (GCR), World Scientific Publishing Co. Pte. Ltd., vol. 6(01), pages 49-132.
    10. Turalay Kenc & Emrah Ismail Cevik, 2021. "Estimating volatility clustering and variance risk premium effects on bank default indicators," Review of Quantitative Finance and Accounting, Springer, vol. 57(4), pages 1373-1392, November.
    11. Jagriti Srivastava & Balagopal Gopalakrishnan, 2021. "In-kind financing during a pandemic: Trade credit and COVID-19," Working papers 473, Indian Institute of Management Kozhikode.
    12. Tetyana Balyuk & Nagpurnanand R. Prabhala & Manju Puri, 2020. "Indirect Costs of Government Aid and Intermediary Supply Effects: Lessons From the Paycheck Protection Program," NBER Working Papers 28114, National Bureau of Economic Research, Inc.
    13. Pathan, Shams & Haq, Mamiza & Faff, Robert & Seymour, Trent, 2021. "Institutional investor horizon and bank risk-taking," Journal of Corporate Finance, Elsevier, vol. 66(C).
    14. Nguyen, Duc Nguyen & Nguyen, Canh Phuc & Dang, Le Phuong Xuan, 2022. "Uncertainty and corporate default risk: Novel evidence from emerging markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 78(C).
    15. Duan, Jin-Chuan & Kim, Baeho & Kim, Woojin & Shin, Donghwa, 2018. "Default probabilities of privately held firms," Journal of Banking & Finance, Elsevier, vol. 94(C), pages 235-250.
    16. Leroy, Aurélien & Lucotte, Yannick, 2017. "Is there a competition-stability trade-off in European banking?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 46(C), pages 199-215.
    17. Srivastava, Jagriti & Gopalakrishnan, Balagopal, 2021. "In-kind financing during a pandemic: Trade credit and COVID-19," MPRA Paper 108951, University Library of Munich, Germany.
    18. Chia-Chien Chang & Yung -Jen Chung, 2016. "Can Basel Iii Liquidity Risk Measures Explain Taiwan Bank Failures," Proceedings of Economics and Finance Conferences 3205450, International Institute of Social and Economic Sciences.
    19. Andrieș, Alin Marius & Nistor, Simona & Ongena, Steven & Sprincean, Nicu, 2020. "On Becoming an O-SII (“Other Systemically Important Institution”)," Journal of Banking & Finance, Elsevier, vol. 111(C).
    20. Ken Miyajima & Jorge A. Chan-Lau & Weimin Miao & Jongsoon Shin, 2017. "Assessing Corporate Vulnerabilities in Indonesia: A Bottom-Up Default Analysis," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 24(4), pages 269-289, December.
    21. Alin-Marius Andries & Florentina Melnic & Simona Nistor, 2018. "Effects of Macroprudential Policy on Systemic Risk and Bank Risk Taking," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 68(3), pages 202-244, July.
    22. Robert F. Engle & Emil N. Siriwardane, 2018. "Structural GARCH: The Volatility-Leverage Connection," The Review of Financial Studies, Society for Financial Studies, vol. 31(2), pages 449-492.
    23. Islam, Md Shahidul & Alam, Md Samsul & Bin Hasan, Shehub & Mollah, Sabur, 2022. "Firm-level political risk and distance-to-default," Journal of Financial Stability, Elsevier, vol. 63(C).
    24. Ali, Searat & Hussain, Nazim & Iqbal, Jamshed, 2021. "Corporate governance and the insolvency risk of financial institutions," The North American Journal of Economics and Finance, Elsevier, vol. 55(C).
    25. Zhang, Xuan & Ouyang, Ruolan & Liu, Ding & Xu, Liao, 2020. "Determinants of corporate default risk in China: The role of financial constraints," Economic Modelling, Elsevier, vol. 92(C), pages 87-98.

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