Market Valuation and Risk Assessment of Canadian Banks
Eli Papakirykos and
Mingwei Yuan ()
Staff Working Papers from Bank of Canada
The authors apply the asset-valuation model developed by Rabinovitch (1989) to six publicly traded Canadian banks over the period 1982–2002. The model is an extension of the Merton (1977a) option-pricing model with the incorporation of stochastic interest rates. The authors introduce the Z-score, a measure of distance-to-default, which can be a useful tool for regulators in assessing the risk of bank failures. The Z-scores, overall, suggest that Canadian banks are far from the point of default. The authors also find that both the market valuation of the bank assets and the Z-score of the Canadian banks demonstrate similar regime shifts in the late 1990s, which may be related to regulatory changes during the 1990s.
Keywords: Financial; institutions (search for similar items in EconPapers)
JEL-codes: G12 G21 (search for similar items in EconPapers)
Pages: 26 pages
New Economics Papers: this item is included in nep-bec and nep-fin
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Journal Article: Market Valuation and Risk Assessment of Canadian Banks (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:04-34
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