Country Default Probabilities: Assessing and Backtesting
AbstractWe address the problem how to estimate default probabilities for sovereign countries based on market data of traded debt. A structural Merton-type model is applied to a sample of emerging market and transition countries. In this context, only few and heterogeneous default probabilities are derived, which is problematic for backtesting. To deal with this problem, we construct likelihood ratio test statistics and quick backtesting procedures. --
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Bibliographic InfoPaper provided by Dresden University of Technology, Faculty of Business and Economics, Department of Economics in its series Dresden Discussion Paper Series in Economics with number 12/06.
Date of creation: 2006
Date of revision:
Sovereign default; Country risk; Default probability; Likelihood ratio test;
Find related papers by JEL classification:
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
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