Estimating Probability of Default for Systemically Important Financial Institutions during Covid-19 Pandemic. Evidence from Europe and USA
George Anton (),
Cosmin-Octavian Cepoi () and
Cătălin-Emilian Huidumac-Petrescu ()
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George Anton: Corresponding author: Department of Economics and Economic Policies, Faculty of Theoretical and Applied Economics, Bucharest University of Economic Studies, Bucharest, Romania.
Cosmin-Octavian Cepoi: Victor Slăvescu Center for Financial and Monetary Research, Romanian Academy, Bucharest.
Cătălin-Emilian Huidumac-Petrescu: Department of Economics and Economic Policies, Faculty of Theoretical and Applied Economics, Bucharest University of Economic Studies, Bucharest, Romania.
Journal for Economic Forecasting, 2022, issue 2, 44-53
In this paper, we estimate the probability of default for 30 systemically important financial institutions from Europe and USA over seventeen years, from 2004 to 2020. The results indicate that the default risk has increased during the COVID-19 pandemic, but is significantly lower as compared to the period preceding the financial crisis of 2008. Moreover, the American banks appear to absorb the shock caused by COVID-19 much more smoothly as compared to their European peers.
Keywords: KMV model; COVID-19 pandemic; systemic risk (search for similar items in EconPapers)
JEL-codes: C6 E5 H1 I15 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:rjr:romjef:v::y:2022:i:2:p:44-53
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