Modelling sovereign default risk: comparing models and capturing the impact of the business cycle

Yao Djifa N'Sougan and Issouf Soumaré

Journal of Risk Management in Financial Institutions, 2013, vol. 6, issue 1, 75-96

Abstract: This paper compares two sovereign default risk models: the contingent claims analysis method and the ordered probit econometric approach. The default indicators obtained from the two models are correlated with sovereign credit default swap spreads and indicate that sovereign default risk is higher during economic recessions than during expansions.

Keywords: sovereign default; contingent claims analysis; ordered probit; G13; G17; G24; G32 (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:aza:rmfi00:y:2013:v:6:i:1:p:75-96

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