Forward looking banking stress in EMU countries
Based on contingent claims analysis(CCA), this paper tries to estimate the systemic risk build-up in the European Economic and Monetary Union (EMU) countries using a market based measure "distance-to-default"(DtD). It analyzes the individual and aggregated series for a comprehensive set of...
| Authors: | , , |
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| Format: | report |
| Publication Date: | 2014 |
| Country: | España |
| Institution: | Universidad Complutense de Madrid (UCM) |
| Repository: | Docta Complutense |
| Language: | English |
| OAI Identifier: | oai:docta.ucm.es:20.500.14352/41632 |
| Online Access: | https://hdl.handle.net/20.500.14352/41632 |
| Access Level: | Open access |
| Keyword: | G01 G21 G28 Contingent claim analysis Distance-to-default Systemic risk Bancos y cajas Crisis económicas Econometría (Economía) Integración económica 5307.06 Fluctuaciones Económicas 5302 Econometría 5309.02 Integración Económica |
| Summary: | Based on contingent claims analysis(CCA), this paper tries to estimate the systemic risk build-up in the European Economic and Monetary Union (EMU) countries using a market based measure "distance-to-default"(DtD). It analyzes the individual and aggregated series for a comprehensive set of banks in each eurozone country over the period 2004-Q4 to 2013-Q2. Given the structural differences in financial sector and banking regulations at national level, the indices provide a useful indicator for monitoring country specific banking vulnerability and stress. We find that average DtD indicators are intuitive, forward-looking and timely risk indicators. The underlying trend, fluctuations and correlations among indices help us analyze the interdependence while cross-sectional differences in DtD prior to crisis suggest banking sector fragility in peripheral EMU countries. |
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