Bank insolvency risk, Z-score measures and unimodal returns: A refinement

Mathieu Mercadier and Frank Strobel

The Quarterly Review of Economics and Finance, 2024, vol. 98, issue C

Abstract: We develop refined probability bounds for bank insolvency risk measures based on the Z-score, analogous to those given by Cantelli’s inequality under the additional assumption of unimodality of returns, drawing on the one-sided Vysochanskii-Petunin inequality. Illustrating empirically for US banks, we argue that (i) unimodality of returns is not an overly restrictive assumption in this context, and (ii) the refined measures provide a less conservative alternative to insolvency probability bounds drawing on the (two-sided) Vysochanskii-Petunin inequality, particularly for banks with higher levels of insolvency risk.

Keywords: Bank; Insolvency risk; Z-score; Unimodality; One-sided Vysochanskii-Petunin inequality (search for similar items in EconPapers)
JEL-codes: C46 G21 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S106297692400125X
Full text for ScienceDirect subscribers only

Related works:
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:quaeco:v:98:y:2024:i:c:s106297692400125x

DOI: 10.1016/j.qref.2024.101919

Access Statistics for this article

The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty

More articles in The Quarterly Review of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().