An Option-Based Approach to Bank Vulnerabilities in Emerging Markets [electronic resource] / Arnaud Jobert.
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TextSeries: IMF Working Papers; Working Paper ; No. 04/33Publication details: Washington, D.C. : International Monetary Fund, 2004Description: 1 online resource (22 p.)ISBN: 1451845219 :ISSN: 1018-5941Subject(s): Bank Distress | Banking | Correlation | Distance-to-Default | Forecasting | Probability | Argentina | Hong Kong Special Administrative Region of China | Korea, Republic of | ThailandAdditional physical formats: Print Version:: An Option-Based Approach to Bank Vulnerabilities in Emerging MarketsOnline resources: IMF e-Library | IMF Book Store Abstract: We measure bank vulnerability in emerging markets using the distance-to-default, a risk-neutral indicator based on Merton's (1974) structural model of credit risk. The indicator is estimated using equity prices and balance-sheet data for 38 banks in 14 emerging market countries. Results show it can predict a bank's credit deterioration up to nine months in advance. The distance-to-default, hence, may prove useful for bank monitoring purposes.
We measure bank vulnerability in emerging markets using the distance-to-default, a risk-neutral indicator based on Merton's (1974) structural model of credit risk. The indicator is estimated using equity prices and balance-sheet data for 38 banks in 14 emerging market countries. Results show it can predict a bank's credit deterioration up to nine months in advance. The distance-to-default, hence, may prove useful for bank monitoring purposes.
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