This paper suggests a novel approach to assess corporate sector solvency risk. The approach uses a Bottom-Up Default Analysis that projects probabilities of default of individual firms conditional on macroeconomic conditions and financial risk factors. This allows a direct macro-financial link...

Despite increased need for top-down stress tests of financial institutions, performing them is challenging owing to the absence of granular information on banks’ trading and loan portfolios. To deal with these data shortcomings, this paper presents a market-based structural top-down stress...

This paper describes a corporate sector vulnerability indicator, the expected number of defaults (END), based on the joint occurrence of defaults among a number of firms and/or institutions. The END indicator is general enough to assess systemic risk in the corporate and financial sectors, as...

This survey reviews a number of different fundamentals-based models for estimating default probabilities for firms and/or industries, and illustrates them with real applications by practitioners and policy making institutions. The models are especially useful when the firms analyzed do not have...

This paper finds that systematic default risk, or the event of widespread defaults in the corporate sector, is an important determinant of equity returns. Moreover, the market price of systematic default risk is one order of magnitude higher than the market price of other risk factors. In...

This paper reviews a number of different techniques for estimating default probabilities from the prices of publicly traded securities. These techniques are useful for assessing credit exposure, systemic risk, and stress testing financial systems. The choice of techniques was guided by their...

This paper introduces the quantile regression- based Distance-to-Default to Probability of Default (DD-PD) mapping, which links individual firms’ DD to their real world PD. Since changes in the DD depend on a handful of parameters, the mapping easily accommodates shocks arising from...