Country default probabilities : assessing and backtesting

Alexander Karmann; Stefan Huschens; Dominik Maltritz; Konstantin Vogl

We address the problem how to estimate default probabilities for sovereign countries based on market data of traded debt. A structural Merton-type model is applied to a sample of emerging market and transition countries. In this context, only few and heterogeneous default probabilities are derived, which is problematic for backtesting. To deal with this problem, we construct likelihood ratio test statistics and quick backtesting procedures.

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Year of publication:	2006
Authors:	Karmann, Alexander ; Huschens, Stefan ; Maltritz, Dominik ; Vogl, Konstantin
Publisher:	Dresden : Univ. of Technology, Fac. of Business Management and Economics
Subject:	Länderrisiko \| Country risk \| Theorie \| Theory \| Statistischer Test \| Statistical test \| Statistische Verteilung \| Statistical distribution \| Schätzung \| Estimation \| Schwellenländer \| Emerging economies