IMF Working Papers

An Option-Based Approach to Bank Vulnerabilities in Emerging Markets

By Arnaud Jobert, Janet Kong, Jorge A Chan-Lau

February 1, 2004

Download PDF

Preview Citation

Format: Chicago

Arnaud Jobert, Janet Kong, and Jorge A Chan-Lau. An Option-Based Approach to Bank Vulnerabilities in Emerging Markets, (USA: International Monetary Fund, 2004) accessed November 8, 2024
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

We measure bank vulnerability in emerging markets using the distance-to-default, a risk-neutral indicator based on Merton's (1974) structural model of credit risk. The indicator is estimated using equity prices and balance-sheet data for 38 banks in 14 emerging market countries. Results show it can predict a bank's credit deterioration up to nine months in advance. The distance-to-default, hence, may prove useful for bank monitoring purposes.

Subject: Asset and liability management, Asset valuation, Banking, Commercial banks, Credit, Emerging and frontier financial markets, Financial institutions, Financial markets, Money, Stocks

Keywords: Annual balance sheet data, Asset valuation, Asset volatility, Banco de Bogota, Bank, Bank distress, Bank vulnerability, Banks, Banks Used, Commercial banks, Credit, Distance-to-default, Distress event, Downgraded bank, East Asia, Emerging and frontier financial markets, Emerging markets, Stocks, WP

Publication Details

  • Pages:

    22

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2004/033

  • Stock No:

    WPIEA0332004

  • ISBN:

    9781451845211

  • ISSN:

    1018-5941

You May Also Be Interested In...

Colombia: Technical Assistance Report-Report on the Mineral Asset Accounts and Carbon Footprints Mission (May 20–24, 2024)

November 8, 2024

Grenada: Systemic Risk Monitoring

November 7, 2024

Implementing Board-Endorsed Recommendations From The 2024 External Evaluation Of The Fund’s Independent Evaluation Office (IEO)

November 7, 2024

The Federal Democratic Republic of Ethiopia: First Review Under the Extended Credit Facility Arrangement, Request for Modification of Performance Criteria, and Financing Assurances Review-Press Release; Staff Report; and Statement by the Executive Director for The Federal Democratic Republic of Ethiopia

November 4, 2024