Estimating volatility clustering and variance risk premium effects on bank default indicators

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dc.authorscopusid6507301034
dc.authorscopusid26653963900
dc.contributor.authorKenc, T.
dc.contributor.authorÇevik, Emrah İsmail
dc.date.accessioned2022-05-11T14:04:47Z
dc.date.available2022-05-11T14:04:47Z
dc.date.issued2021
dc.departmentFakülteler, İktisadi ve İdari Bilimler Fakültesi, İktisat Bölümü
dc.description.abstractDefault risk increases substantially during financial stress times due to mainly the two reasons: volatility clustering and investors’ desire to protect themselves from such increases in volatility. It manifested in the aftermath of the Global Financial Crisis of 2008–2009 with unpleasant outcomes of many bankruptcies and severe financial distress. To account for these features, we adapted the structural credit risk approach to include both time-varying (return) volatility and risk premium about the return volatility itself. By applying the model to US banks, we obtain better bank default indicators in comparison to the benchmark models. © 2021, The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature.
dc.description.sponsorshipUniversity of York; Durham University; Korea Development Institute, KDI
dc.description.sponsorshipWe thank the late Peter Christoffersen, Lynne Evans, Jens Hagendorff, Thomas Mazzoni, Aydin Ozkan, Martin Sola and seminar participants at the Durham University, the York University, England, the Universidad Torcuato Di Tella, the Korea Development Institute, the Korea Capital Market Institute, the Bank of Korea and the Korean Institute of Finance for useful comments on earlier versions of the paper. Any remaining errors are our responsibility.
dc.identifier.doi10.1007/s11156-021-00981-6
dc.identifier.endpage1392
dc.identifier.issn0924-865X
dc.identifier.issue4en_US
dc.identifier.scopus2-s2.0-85105410028
dc.identifier.scopusqualityQ2
dc.identifier.startpage1373
dc.identifier.urihttps://doi.org/10.1007/s11156-021-00981-6
dc.identifier.urihttps://hdl.handle.net/20.500.11776/4774
dc.identifier.volume57
dc.identifier.wosWOS:000644735300001
dc.identifier.wosqualityN/A
dc.indekslendigikaynakWeb of Science
dc.indekslendigikaynakScopus
dc.institutionauthorÇevik, Emrah İsmail
dc.language.isoen
dc.publisherSpringer
dc.relation.ispartofReview of Quantitative Finance and Accounting
dc.relation.publicationcategoryMakale - Uluslararası Hakemli Dergi - Kurum Öğretim Elemanıen_US
dc.rightsinfo:eu-repo/semantics/openAccess
dc.subjectBanking
dc.subjectDefault risk
dc.subjectGARCH option pricing
dc.subjectStructural credit risk
dc.subjectVariance risk premiums
dc.titleEstimating volatility clustering and variance risk premium effects on bank default indicators
dc.typeArticle

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