EconPapers    
Economics at your fingertips  
 

Deriving the term structure of banking crisis risk with a compound option approach: The case of Kazakhstan

Stefan Eichler, Alexander Karmann and Dominik Maltritz

No 2010,01, Discussion Paper Series 2: Banking and Financial Studies from Deutsche Bundesbank

Abstract: We use a compound option-based structural credit risk model to infer a term structure of banking crisis risk from market data on bank stocks in daily frequency. Considering debt service payments with different maturities this term structure assigns a separate estimator for short- and long-term default risk to each maturity. Applying the Duan (1994) maximum likelihood approach, we find for Kazakhstan that the overall crisis probability was mainly driven by short-term risk, which increased from 25% in March 2007 to 80% in December 2008. Concurrently, the long-term default risk increased from 20% to only 25% during the same period.

Keywords: Banking crisis; bank default; option pricing theory; compound option; liability structure (search for similar items in EconPapers)
JEL-codes: G12 G17 G18 G21 G32 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-ban and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/32551/1/625820037.pdf (application/pdf)

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:zbw:bubdp2:201001

Access Statistics for this paper

More papers in Discussion Paper Series 2: Banking and Financial Studies from Deutsche Bundesbank Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().

 
Page updated 2024-06-28
Handle: RePEc:zbw:bubdp2:201001