An Option-Based Approach to Bank Vulnerabilities in Emerging Markets

We measure bank vulnerability in emerging markets using the distance-to-default, a risk-neutral indicator based on Merton's (1974) structural model of credit risk. The indicator is estimated using equity prices and balance-sheet data for 38 banks in 14 emerging market countries. Results show it can predict a bank's credit deterioration up to nine months in advance. The distance-to-default, hence, may prove useful for bank monitoring purposes.

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Year of publication:	2004-02-01
Authors:	Jobert, Arnaud ; Kong, Janet ; Chan-Lau, Jorge A.
Institutions:	International Monetary Fund (IMF)
Subject:	Banks \| Emerging markets \| forecasting \| banking \| correlation \| bank distress \| probability \| banking system \| equation \| equations \| covariance \| banking crises \| linear models \| bank failure \| bank vulnerability \| statistic \| samples \| bank monitoring \| statistical tests \| standard errors \| military bank \| bank fragility \| bank examinations \| random variables \| probability density function \| mathematical statistics \| regression analysis \| federal deposit insurance \| statistics \| standard deviations \| subordinated debt \| exponential family \| bank vulnerabilities \| probability of default \| banks ? liabilities \| probability density \| data analysis \| bank rating \| normal distribution \| bank risk \| sample size \| bank regulators \| banking crisis \| bank supervisors \| conditional expectation \| statistical test \| statistical package \| bank failures \| deposit insurance

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Extent:	application/pdf
Series:	IMF Working Papers.
Type of publication:	Book / Working Paper
Language:	English
Notes:	The text is part of a series IMF Working Papers Number 04/33 2 pages long
Source:	RePEc - Research Papers in Economics

Persistent link: https://ebvufind01.dmz1.zbw.eu/10005826670