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Deriving the Term Structure of Banking Crisis Risk with a Compound Option Approach: The Case of Kazakhstan (Eichler S., Karmann A.)

Financial Crises Risk-taking and Risk Management Structure of Assets&Liabilities

Abstract We use a compound option-based structural credit risk model to infer a term structure of banking crisis risk from market data on bank stocks in daily frequency. Considering debt service payments with different maturities this term structure assigns a separate estimator for short- and long-term default risk to each maturity. Applying the Duan (1994) maximum likelihood approach, we find for Kazakhstan that the overall crisis probability was mainly driven by short-term risk, which increased from 25% in March 2007 to 80% in December 2008. Concurrently, the long-term default risk increased from 20% to only 25% during the same period.
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Libref/ Eichler S., Karmann A. (2010) “Deriving the Term Structure of Banking Crisis Risk with a Compound Option Approach: The Case of Kazakhstan”, Deutsche Bundesbank Discussion Paper No 01/2010, pp. 1-48
© Программирование — Александр Красильников, 2008
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