Bank default indicators with volatility clustering
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Dosyalar
Tarih
2021
Yazarlar
Dergi Başlığı
Dergi ISSN
Cilt Başlığı
Yayıncı
Springer Science and Business Media Deutschland GmbH
Erişim Hakkı
info:eu-repo/semantics/closedAccess
Özet
We estimate default measures for US banks using a model capable of handling volatility clustering like those observed during the Global Financial Crisis (GFC). In order to account for the time variation in volatility, we adapted a GARCH option pricing model which extends the seminal structural approach of default by Merton (J Finance 29(2):449, 1974) and calculated “distance to default” indicators that respond to heightened market developments. With its richer volatility dynamics, our results better reflect higher expected default probabilities precipitated by the GFC. The diagnostics show that the model generally outperforms standard models of default and offers relatively good indicators in assessing bank failures. © 2020, Springer-Verlag GmbH Germany, part of Springer Nature.
Açıklama
Anahtar Kelimeler
Bank defaults, Contingent claims, Default risk, GARCH option pricing, Structural credit risk models
Kaynak
Annals of Finance
WoS Q Değeri
N/A
Scopus Q Değeri
Q2
Cilt
17
Sayı
1
