Toward a bottom-up approach to assessing sovereign default risk: an update
We propose a totally new approach toward assessing sovereign risk by examining rigorously the health and aggregate default risk of a nation’s private corporate sector. Models such as our new Z-Metrics™ approach can be utilized to measure the median probability of default of the non-financial sector cumulatively for five years, both as an absolute measure of corporate risk vulnerability and a relative measure compared to other sovereigns and to the market’s assessment via the now liquid credit-default-swap market. Specifically, we measure the default probabilities of listed corporate entities in eleven European countries, and the U.S., as of 2008-2010. These periods coincide with the significant rise in concern with sovereign default risk in the euro country sphere. We conclude that our corporate health index of the private sector measured at periods prior to the explicit recognition by most credit professionals, not only gave an effective early warning indicator but provided a mostly appropriate hierarchy of relative sovereign risk. Policy officials should, we believe, nurture, not penalize, the tax revenue paying and jobs generating private sector when considering austerity measures of distressed sovereigns.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Volume (Year): 34 (2012)
Issue (Month): ()
|Contact details of provider:|| Postal: 77 Water Street, 10th Floor, New York NY 10005|
Phone: +1 212 284 8600
Web page: http://www.capco.com/
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Eli M. Remolona & Michela Scatigna & Eliza Wu, 2008. "A ratings-based approach to measuring sovereign risk," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 13(1), pages 26-39.
- Gerlach, Stefan & Schulz, Alexander & Wolff, Guntram B., 2010.
"Banking and Sovereign Risk in the Euro Area,"
CEPR Discussion Papers
7833, C.E.P.R. Discussion Papers.
- Dale F. Gray & Robert C. Merton & Zvi Bodie, 2006. "A New Framework for Analyzing and Managing Macrofinancial Risks of an Economy," NBER Working Papers 12637, National Bureau of Economic Research, Inc.
- Nicola Gennaioli & Alberto Martin & Stefano Rossi, 2012.
"Sovereign Default, Domestic Banks, and Financial Institutions,"
462, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Nicola Gennaioli & Alberto Martin & Stefano Rossi, 2014. "Sovereign Default, Domestic Banks, and Financial Institutions," Journal of Finance, American Finance Association, vol. 69(2), pages 819-866, 04.
- Nicola Gennaioli & Alberto Martin & Stefano Rossi, 2009. "Sovereign default, domestic banks and financial institutions," Economics Working Papers 1170, Department of Economics and Business, Universitat Pompeu Fabra, revised Feb 2012.
- Gennaioli, Nicola & Martin, Alberto & Rossi, Stefano, 2010. "Sovereign Default, Domestic Banks and Financial Institutions," CEPR Discussion Papers 7955, C.E.P.R. Discussion Papers.
- Nicola Gennaioli & Alberto Martín & Stefano Rossi, 2012. "Sovereign Default, Domestic Banks and Financial Institutions," Working Papers 622, Barcelona Graduate School of Economics.
- Edda Zoli & Silvia Sgherri, 2009. "Euro Area Sovereign Risk During the Crisis," IMF Working Papers 09/222, International Monetary Fund.
- Jens Hilscher & Yves Nosbusch, 2007.
"Determinants of Sovereign Risk: Macroeconomic Fundamentals and the Pricing of Sovereign Debt,"
Money Macro and Finance (MMF) Research Group Conference 2006
114, Money Macro and Finance Research Group, revised 24 Apr 2007.
- Jens Hilscher & Yves Nosbusch, 2010. "Determinants of Sovereign Risk: Macroeconomic Fundamentals and the Pricing of Sovereign Debt," Review of Finance, European Finance Association, vol. 14(2), pages 235-262.
- Oshiro, Naoto & Saruwatari, Yasufumi, 2005. "Quantification of sovereign risk: Using the information in equity market prices," Emerging Markets Review, Elsevier, vol. 6(4), pages 346-362, December.
- Udaibir S Das & Michael G. Papaioannou & Christoph Trebesch, 2010.
"Sovereign Default Risk and Private Sector Access to Capital in Emerging Markets,"
IMF Working Papers
10/10, International Monetary Fund.
- Das, Udaibir S. & Papaioannou, Michael G. & Trebesch, Christoph, . "Sovereign Default Risk and Private Sector Access to Capital in Emerging Markets," Chapters in Economics, University of Munich, Department of Economics.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2009.
"Varieties of Crises and Their Dates,"
in: This Time Is Different: Eight Centuries of Financial Folly
Princeton University Press.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "This Time Is Different: Eight Centuries of Financial Folly," Economics Books, Princeton University Press, edition 1, number 8973.
- Feder, Gershon & Just, Richard E., 1977. "A study of debt servicing capacity applying logit analysis," Journal of Development Economics, Elsevier, vol. 4(1), pages 25-38, February.
- Babbel, D.F., 1996. "Insuring Sovereign Debt Against Default," World Bank - Discussion Papers 328, World Bank.
- Smith, Roy C. & Walter, Ingo, 2003. "Global Banking," OUP Catalogue, Oxford University Press, edition 2, number 9780195134360, December.
- Miguel A. Segoviano Basurto & Carlos Caceres & Vincenzo Guzzo, 2010. "Sovereign Spreads; Global Risk Aversion, Contagion or Fundamentals?," IMF Working Papers 10/120, International Monetary Fund.
- Jamal Ibrahim Haidar, 2012.
"Sovereign Credit Risk in the Eurozone,"
World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 13(1), pages 123-136, January.
- Pomerleano, Michael, 1998. "The East Asia crisis and corporate finances : the untold micro story," Policy Research Working Paper Series 1990, The World Bank.
- Baek, In-Mee & Bandopadhyaya, Arindam & Du, Chan, 2005. "Determinants of market-assessed sovereign risk: Economic fundamentals or market risk appetite?," Journal of International Money and Finance, Elsevier, vol. 24(4), pages 533-548, June.
- Feder, Gershon & Just, Richard & Ross, Knud, 1981. "Projecting Debt Servicing Capacity of Developing Countries," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 16(05), pages 651-669, December.
When requesting a correction, please mention this item's handle: RePEc:ris:jofitr:1508. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Prof. Shahin Shojai)
If references are entirely missing, you can add them using this form.