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Estimating Probability of Default for Systemically Important Financial Institutions during Covid-19 Pandemic. Evidence from Europe and USA

Author

Listed:
  • George ANTON

    (Corresponding author: Department of Economics and Economic Policies, Faculty of Theoretical and Applied Economics, Bucharest University of Economic Studies, Bucharest, Romania.)

  • Cosmin-Octavian CEPOI

    (Victor Slăvescu Center for Financial and Monetary Research, Romanian Academy, Bucharest.)

  • Cătălin-Emilian HUIDUMAC-PETRESCU

    (Department of Economics and Economic Policies, Faculty of Theoretical and Applied Economics, Bucharest University of Economic Studies, Bucharest, Romania.)

Abstract

In this paper, we estimate the probability of default for 30 systemically important financial institutions from Europe and USA over seventeen years, from 2004 to 2020. The results indicate that the default risk has increased during the COVID-19 pandemic, but is significantly lower as compared to the period preceding the financial crisis of 2008. Moreover, the American banks appear to absorb the shock caused by COVID-19 much more smoothly as compared to their European peers.

Suggested Citation

  • George ANTON & Cosmin-Octavian CEPOI & Cătălin-Emilian HUIDUMAC-PETRESCU, 2022. "Estimating Probability of Default for Systemically Important Financial Institutions during Covid-19 Pandemic. Evidence from Europe and USA," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 44-53, April.
    • Handle: RePEc:rjr:romjef:v::y:2022:i:2:p:44-53
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    References listed on IDEAS

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    More about this item

    Keywords

    KMV model; COVID-19 pandemic; systemic risk;
    All these keywords.

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • H1 - Public Economics - - Structure and Scope of Government
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development

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