The Contingent Claims Approach to Corporate Vulnerability Analysis: Estimating Default Risk and Economy-Wide Risk Transfer

Author/Editor:

Yingbin Xiao ; Dale F. Gray ; Cheng Hoon Lim ; Michael T. Gapen

Publication Date:

July 1, 2004

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

In this paper, we examine the ability of the contingent claims approach (CCA) to identify corporate sector and economy-wide vulnerabilities. We apply the Moody's MfRisk model, which uses aggregated CCA principles, to assess vulnerabilities retroactively in two historical country cases. The results indicate that the method may prove helpful in identifying corporate sector vulnerabilities and estimating the associated value of risk transfer across interrelated balance sheets of the corporate, financial, and public sectors.

Series:

Working Paper No. 2004/121

Subject:

Asset valuation Corporate sector Financial sector Financial statements Public sector

English

Publication Date:

July 1, 2004

ISBN/ISSN:

9781451854411/1018-5941

Stock No:

WPIEA1212004

Pages:

43

Please address any questions about this title to publications@imf.org