Modeling default probabilities: The case of Brazil

Benjamin Tabak, André Victor Doherty Luduvice and Daniel Cajueiro

Journal of International Financial Markets, Institutions and Money, 2011, vol. 21, issue 4, 513-534

Abstract: Using disaggregated data from the Brazilian stock market, we calculate default probabilities for 30 different economic sectors. Empirical results suggest that domestic macroeconomic factors can explain these default probabilities. In addition, we construct the Minimum Spanning Tree (MST) and the ultrametric hierarchical tree with the MST based on default probabilities to disclose common trends, which reveals that some sectors form clusters. The results of this paper imply that macroeconomic variables have distinct effects on default probabilities, which is important to take into account in credit risk modeling and the generation of stress test scenarios.

Keywords: Probabilities; of; default; Default; risk; Capital; Asset; Pricing; Model; (CAPM); Minimal; Spanning; Tree; (MST) (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1042443111000084
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Modeling Default Probabilities: the case of Brazil (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:21:y:2011:i:4:p:513-534

Access Statistics for this article

Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely

More articles in Journal of International Financial Markets, Institutions and Money from Elsevier
Bibliographic data for series maintained by Catherine Liu ().