Market-Based Estimation of Default Probabilities and its Application to Financial Market Surveillance
Author
Abstract
Suggested Citation
Download full text from publisher
References listed on IDEAS
- Gropp, Reint & Vesala, Jukka & Vulpes, Giuseppe, 2006.
"Equity and Bond Market Signals as Leading Indicators of Bank Fragility,"
Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(2), pages 399-428, March.
- Reint Gropp & Jukka M. Vesala & Giuseppe Vulpes, 2002. "Equity and bond market signals as leading indicators of bank fragility," Conference Series ; [Proceedings], Federal Reserve Bank of Boston.
- Vesala, Jukka & Vulpes, Giuseppe & Gropp, Reint, 2002. "Equity and bond market signals as leading indicators of bank fragility," Working Paper Series 150, European Central Bank.
- Ait-Sahalia, Yacine & Lo, Andrew W., 2000.
"Nonparametric risk management and implied risk aversion,"
Journal of Econometrics, Elsevier, vol. 94(1-2), pages 9-51.
- Yacine Ait-Sahalia & Andrew W. Lo, 2000. "Nonparametric Risk Management and Implied Risk Aversion," NBER Working Papers 6130, National Bureau of Economic Research, Inc.
- Liu, Xiaoquan & Shackleton, Mark B. & Taylor, Stephen J. & Xu, Xinzhong, 2007. "Closed-form transformations from risk-neutral to real-world distributions," Journal of Banking & Finance, Elsevier, vol. 31(5), pages 1501-1520, May.
- 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.
- Merton, Robert C., 1973. "On the pricing of corporate debt: the risk structure of interest rates," Working papers 684-73., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Roberto Blanco & Simon Brennan & Ian W. Marsh, 2004.
"An empirical analysis of the dynamic relationship between investment grade bonds and credit default swaps,"
Working Papers
0401, Banco de España.
- Roberto Blanco & Simon Brennan & Ian W Marsh, 2004. "An empirical analysis of the dynamic relationship between investment-grade bonds and credit default swaps," Bank of England working papers 211, Bank of England.
- Arnaud Jobert & Ms. Janet Kong & Mr. Jorge A Chan-Lau, 2004. "An Option-Based Approach to Bank Vulnerabilities in Emerging Markets," IMF Working Papers 2004/033, International Monetary Fund.
- Gurdip Bakshi & Nikunj Kapadia & Dilip Madan, 2003. "Stock Return Characteristics, Skew Laws, and the Differential Pricing of Individual Equity Options," The Review of Financial Studies, Society for Financial Studies, vol. 16(1), pages 101-143.
- 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.
- Roberto Blanco & Simon Brennan & Ian W. Marsh, 2005. "An Empirical Analysis of the Dynamic Relation between Investment‐Grade Bonds and Credit Default Swaps," Journal of Finance, American Finance Association, vol. 60(5), pages 2255-2281, October.
- Mr. Jorge A Chan-Lau, 2003. "Anticipating Credit Events Using Credit Default Swaps, with An Application to Sovereign Debt Crises," IMF Working Papers 2003/106, International Monetary Fund.
- Fons, Jerome S, 1987. "The Default Premium and Corporate Bond Experience," Journal of Finance, American Finance Association, vol. 42(1), pages 81-97, March.
- Mr. Jorge A Chan-Lau & Ms. Yoon Sook Kim, 2004. "Equity Prices, Credit Default Swaps, and Bond Spreads in Emerging Markets," IMF Working Papers 2004/027, International Monetary Fund.
- Robert Jarrow, 2001. "Default Parameter Estimation Using Market Prices," Financial Analysts Journal, Taylor & Francis Journals, vol. 57(5), pages 75-92, September.
Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
Cited by:
- Christian Capuano, 2008. "The Option-iPoD," IMF Working Papers 2008/194, International Monetary Fund.
- Gulcan Yildirim Gungor & Tuba Pelin Sumer, 2020. "Alternative Approaches for Modelling Corporate Sector Credit Risk," CBT Research Notes in Economics 2017, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
- Miguel Sarmiento & Jorge Cely & Carlos León, 2015.
"Monitoring the Unsecured Interbank Funds Market,"
Borradores de Economia
14080, Banco de la Republica.
- Miguel Sarmiento & Jorge Cely & Carlos León, 2015. "Monitoring the Unsecured Interbank Funds Market," Borradores de Economia 917, Banco de la Republica de Colombia.
- Kleinow, Jacob & Moreira, Fernando, 2016. "Systemic risk among European banks: A copula approach," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 42(C), pages 27-42.
- David Xiao, 2023. "Default Process Modeling and Credit Valuation Adjustment," Papers 2309.03311, arXiv.org.
- Lee, David, 2023. "Default Forecasting and Credit Valuation Adjustment," MPRA Paper 118578, University Library of Munich, Germany.
- Dua, Pami & Kapur, Hema, 2018. "Macro stress testing and resilience assessment of Indian banking," Journal of Policy Modeling, Elsevier, vol. 40(2), pages 452-475.
- Daniel Law & Mr. Shaun K. Roache, 2015. "Assessing Default Risks for Chinese Firms: A Lost Cause?," IMF Working Papers 2015/140, International Monetary Fund.
- Sarmiento, Miguel & Cely, Jorge & León, Carlos, 2017. "An early warning indicator system to monitor the unsecured interbank funds market," Research in International Business and Finance, Elsevier, vol. 40(C), pages 114-128.
- Jurevičienė Daiva & Rauličkis Darius, 2016. "Identification of Indicators’ Applicability to Settle Borrowers’ Probability of Default," Economics and Culture, Sciendo, vol. 13(1), pages 53-64, June.
- Jonathan W. Welburn, 2020. "Crises Beyond Belief: Findings on Contagion, the Role of Beliefs, and the Eurozone Debt Crisis from a Borrower–Lender Game," Computational Economics, Springer;Society for Computational Economics, vol. 56(2), pages 263-317, August.
- Ho, Sy Hoa, 2016. "Long and short-runs determinants of the sovereign CDS spread in emerging countries," Research in International Business and Finance, Elsevier, vol. 36(C), pages 579-590.
- Katherine Gleason & Steve Bright & Francis Martinez & Charles Taylor, 2017. "Europe's CoCos Provide a Lesson on Uncertainty," Working Papers 17-02, Office of Financial Research, US Department of the Treasury.
- Andrene Senior & Sherene A. Bailey, 2017. "Estimación y pronóstico del riesgo de incumplimiento: evidencias para Jamaica," Monetaria, Centro de Estudios Monetarios Latinoamericanos, CEMLA, vol. 0(1), pages 141-174, enero-jun.
- Mr. Amadou N Sy & Mr. Jorge A Chan-Lau, 2006. "Distance-to-Default in Banking: A Bridge Too Far?," IMF Working Papers 2006/215, International Monetary Fund.
- Bales, Stephan, 2022. "Sovereign and bank dependence in the eurozone: A multi-scale approach using wavelet-network analysis," International Review of Financial Analysis, Elsevier, vol. 83(C).
- Lemus, Antonio & Nuñez, Marco, 2020. "Pruebas de tensión bancaria: experiencia en los principales mercados financieros del mundo y en Chile [Bank stress tests: evidence from the main financial markets and Chile]," MPRA Paper 99097, University Library of Munich, Germany.
- Pami Dua & Hema Kapur, 2017. "Macro Stress Testing of Indian Bank Groups," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 11(4), pages 375-403, November.
- Ms. Luisa Zanforlin & Nobuyuki Kanazawa, 2014. "Market Signals and the Cost of Credit Risk Protection: An Analysis of CDS Settlement Auctions," IMF Working Papers 2014/239, International Monetary Fund.
- Vilsmeier, Johannes, 2014. "Updating the option implied probability of default methodology," Discussion Papers 43/2014, Deutsche Bundesbank.
- Andrene Senior & Sherene A. Bailey, 2017. "Estimating and Forecasting Default Risk: Evidence from Jamaica," Monetaria, Centro de Estudios Monetarios Latinoamericanos, CEMLA, vol. 0(1), pages 133-162, January-J.
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.- Martin CIHAK, 2007. "Systemic Loss: A Measure of Financial Stability (in English)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 57(1-2), pages 5-26, March.
- Christoffersen, Peter & Jacobs, Kris & Chang, Bo Young, 2013.
"Forecasting with Option-Implied Information,"
Handbook of Economic Forecasting, in: G. Elliott & C. Granger & A. Timmermann (ed.), Handbook of Economic Forecasting, edition 1, volume 2, chapter 0, pages 581-656,
Elsevier.
- Peter Christoffersen & Kris Jacobs & Bo Young Chang, 2011. "Forecasting with Option Implied Information," CREATES Research Papers 2011-46, Department of Economics and Business Economics, Aarhus University.
- Hassan, M. Kabir & Ngene, Geoffrey M. & Yu, Jung-Suk, 2015.
"Credit default swaps and sovereign debt markets,"
Economic Systems, Elsevier, vol. 39(2), pages 240-252.
- M. Kabir Hassan & Geoffrey M. Ngene & Jung Suk-Yu, 2011. "Credit Default Swaps and Sovereign Debt Markets," NFI Working Papers 2011-WP-03, Indiana State University, Scott College of Business, Networks Financial Institute.
- 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.
- 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.
- Miroslav Mateev & Elena Marinova, 2019. "Relation between Credit Default Swap Spreads and Stock Prices: A Non-linear Perspective," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 43(1), pages 1-26, January.
- Jose Giancarlo Gasha & Mr. Andre O Santos & Mr. Jorge A Chan-Lau & Mr. Carlos I. Medeiros & Mr. Marcos R Souto & Christian Capuano, 2009. "Recent Advances in Credit Risk Modeling," IMF Working Papers 2009/162, International Monetary Fund.
- Mr. Amadou N Sy & Mr. Jorge A Chan-Lau, 2006. "Distance-to-Default in Banking: A Bridge Too Far?," IMF Working Papers 2006/215, International Monetary Fund.
- Völz, Manja & Wedow, Michael, 2009. "Does banks size distort market prices? Evidence for too-big-to-fail in the CDS market," Discussion Paper Series 2: Banking and Financial Studies 2009,06, Deutsche Bundesbank.
- Han-Hsing Lee & Kuanyu Shih & Kehluh Wang, 2016. "Measuring sovereign credit risk using a structural model approach," Review of Quantitative Finance and Accounting, Springer, vol. 47(4), pages 1097-1128, November.
- Antje Berndt & Rohan Douglas & Darrell Duffie & Mark Ferguson, "undated".
"Measuring Default Risk Premia from Default Swap Rates and EDFs,"
GSIA Working Papers
2006-E31, Carnegie Mellon University, Tepper School of Business.
- Antje Berndt & Rohan Douglas & Darrell Duffie & Mark Ferguson & David Schranz, 2005. "Measuring default risk premia from default swap rates and EDFs," BIS Working Papers 173, Bank for International Settlements.
- Yu-Fu Chen & Michael Funke & Kadri Männasoo, 2005.
"Extracting Leading Indicators of Bank Fragility from Market Prices - Estonia Focus,"
Dundee Discussion Papers in Economics
185, Economic Studies, University of Dundee.
- Yu-Fu Chen & Michael Funke & Kadri Männasoo, 2006. "Extracting Leading Indicators of Bank Fragility from Market Prices – Estonia Focus," CESifo Working Paper Series 1647, CESifo.
- Harada, Kimie & Ito, Takatoshi, 2011.
"Did mergers help Japanese mega-banks avoid failure? Analysis of the distance to default of banks,"
Journal of the Japanese and International Economies, Elsevier, vol. 25(1), pages 1-22, March.
- Kimie Harada & Takatoshi Ito, 2008. "Did Mergers Help Japanese Mega-Banks Avoid Failure? Analysis of the Distance to Default of Banks," NBER Working Papers 14518, National Bureau of Economic Research, Inc.
- Zhou, Yi, 2022. "Option trading volume by moneyness, firm fundamentals, and expected stock returns," Journal of Financial Markets, Elsevier, vol. 58(C).
- Maltritz, Dominik & Eichler, Stefan, 2010. "Currency crisis prediction using ADR market data: An options-based approach," International Journal of Forecasting, Elsevier, vol. 26(4), pages 858-884, October.
- Maria Kyriacou & Jose Olmo & Marius Strittmatter, 2021. "Optimal portfolio allocation using option‐implied information," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(2), pages 266-285, February.
- Kwamie Dunbar, 2008.
"US corporate default swap valuation: the market liquidity hypothesis and autonomous credit risk,"
Quantitative Finance, Taylor & Francis Journals, vol. 8(3), pages 321-334.
- Kwamie Dunbar, 2007. "US Corporate Default Swap Valuation: The Market Liquidity Hypothesis and Autonomous Credit Risk," Working papers 2007-08, University of Connecticut, Department of Economics.
- Maltritz, Dominik, 2010. "A compound option approach to model the interrelation between banking crises and country defaults: The case of Hungary 2008," Journal of Banking & Finance, Elsevier, vol. 34(12), pages 3025-3036, December.
- Antje Berndt & Rohan Douglas & Darrell Duffie & Mark Ferguson, 2018. "Corporate Credit Risk Premia [Fallen angels and price pressure]," Review of Finance, European Finance Association, vol. 22(2), pages 419-454.
- Mr. Jorge A Chan-Lau & Mr. Toni Gravelle, 2005. "The END: A New Indicator of Financial and Nonfinancial Corporate Sector Vulnerability," IMF Working Papers 2005/231, International Monetary Fund.
More about this item
Keywords
WP; asset swap; value; default probability; financial system; security prices; systemic risk; financial surveillance; CDS contract; CDS market; CDS spread; equity price volatility; credit derivatives securities; Credit default swap; Bonds; Asset prices; Stocks; Asset valuation; Global; East Asia; Europe; Asia and Pacific;All these keywords.
Statistics
Access and download statisticsCorrections
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:imf:imfwpa:2006/104. 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: Akshay Modi (email available below). General contact details of provider: https://edirc.repec.org/data/imfffus.html .
Please note that corrections may take a couple of weeks to filter through the various RePEc services.