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A new risk indicator and stress testing tool : a multifactor Nth-to-Default CDS basket /
This paper generalizes a market-based indicator for financial sector surveillance using a multifactor latent structure in the determination of the default probabilities of an nth-todefault credit default swap (CDS) basket of large complex financial institutions (LCFIs). To estimate the multifactor l...
| Clasificación: | Libro Electrónico |
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| Autores principales: | , , |
| Formato: | Electrónico eBook |
| Idioma: | Inglés |
| Publicado: |
[Washington, D.C.] :
International Monetary Fund,
©2006.
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| Colección: | IMF working paper ;
WP/06/105. |
| Temas: | |
| Acceso en línea: | Texto completo |
| Sumario: | This paper generalizes a market-based indicator for financial sector surveillance using a multifactor latent structure in the determination of the default probabilities of an nth-todefault credit default swap (CDS) basket of large complex financial institutions (LCFIs). To estimate the multifactor latent structure, we link the market risk (the covariance of the LCFIs' equity) to credit risk (the default probability of the CDS basket) in a coherent manner. In addition, to analyze the response of the probabilities of default to changing macroeconomic conditions, we run a stress test by generating shocks to the latent multifactor structure. The results unveil a rich set of default probability dynamics and help in identifying the most relevant sources of risk. We anticipate that this approach could be of value to financial supervisors and risk managers alike. |
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| Descripción Física: | 1 online resource (23 pages). |
| Bibliografía: | Includes bibliographical references. |
| ISBN: | 9781451908992 1451908997 1283512548 9781283512541 1462305415 9781462305414 1452791511 9781452791517 9786613824998 6613824992 |
| ISSN: | 2227-8885 2227-8885 ; |