Country Default Probabilities: Assessing and Backtesting

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:	Vogl, Konstantin ; Maltritz, Dominik ; Huschens, Stefan ; Karmann, Alexander
Institutions:	Fakultät Wirtschaftswissenschaften, Technische Universität Dresden
Subject:	Sovereign default \| Country risk \| Default probability \| Likelihood ratio test

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Extent:	application/pdf
Series:	Dresden Discussion Paper Series in Economics. - ISSN 0945-4829.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number 12/06
Classification:	C12 - Hypothesis Testing ; G33 - Bankruptcy; Liquidation ; C53 - Forecasting and Other Model Applications ; F34 - International Lending and Debt Problems
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10009226142