Distance-to-Default in Banking : A Bridge Too Far? / Amadou Sy, Jorge Chan-Lau.

Format:

Book

Government document

Author/Creator:

Sy, Amadou.

Contributor:

Chan-Lau, Jorge.

International Monetary Fund. Monetary and Financial Systems Department.

Series:

IMF Working Papers; Working Paper ; No. 2006/215

IMF Working Papers

Language:

English

Subjects (All):

Bank capital--Econometric models.

Bank capital.

Bank failures--Econometric models.

Bank failures.

Default (Finance)--Econometric models.

Default (Finance).

Risk--Econometric models.

Risk.

Physical Description:

1 online resource (19 p.)

Edition:

1st ed.

Place of Publication:

Washington, D.C. : International Monetary Fund, 2006.

Language Note:

English

Summary:

In contrast to corporate defaults, regulators typically take a number of statutory actions to avoid the large fiscal costs associated with bank defaults. The distance-to-default, a widely used market-based measure of corporate default risk, ignores such regulatory actions. To overcome this limitation, this paper introduces the concept of distance-to-capital that accounts for pre-default regulatory actions such as those in a prompt-corrective-actions framework. We show that both risk measures can be analyzed using the same theoretical framework but differ depending on the level of capital adequacy thresholds and asset volatility. We also use the framework to illustrate pre-default regulatory actions in Japan in 2001-03.

Contents:

""Contents""; ""I. INTRODUCTION""; ""II. WHAT HAPPENS BEFORE A BANK DEFAULT?""; ""III. A UNIFIED FRAMEWORK FOR DISTANCE MEASURES : DISTANCE-TO-CAPITAL""; ""IV. CASE STUDY: THE RESONA AND ASHIKAGA BANKS""; ""V. CONCLUSIONS""; ""REFERENCES""

Notes:

"September 2006."

Includes bibliographical references.

Description based on print version record.

ISBN:

9786613824097

9781462351817

1462351816

9781452777382

1452777381

9781283511643

1283511649

9781451909289

1451909284

OCLC:

694141205