Forward Looking Banking Stress in EMU Countries
Manish K. Singh (),
Marta Gómez-Puig () and
Simon Sosvilla-Rivero ()
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Manish K. Singh: Faculty of Economics, University of Barcelona
No 201421, IREA Working Papers from University of Barcelona, Research Institute of Applied Economics
Based on contingent claims analysis (CCA), this paper tries to estimate the systemic risk build-up in the European Economic and Monetary Union (EMU) countries using a market based measure \distance-to-default" (DtD). It analyzes the individual and aggregated series for a comprehensive set of banks in each eurozone country over the period 2004-Q4 to 2013-Q2. Given the structural di_erences in _nancial sector and banking regulations at national level, the indices provide a useful indicator for monitoring country speci_c banking vulnerability and stress. We _nd that average DtD indicators are intuitive, forward-looking and timely risk indicators. The underlying trend, uctuations and correlations among indices help us analyze the interdependence while cross-sectional di_erences in DtD prior to crisis suggest banking sector fragility in peripheral EMU countries.
Keywords: contingent claim analysis; distance-to-default; systemic risk JEL classification: G01; G21; G28 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2014-10, Revised 2014-10
New Economics Papers: this item is included in nep-ban, nep-eec and nep-rmg
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Working Paper: Forward looking banking stress in EMU countries (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ira:wpaper:201421
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