The Contingent Claims Approach to Corporate Vulnerability Analysis: Estimating Default Risk and Economy-Wide Risk Transfer
July 1, 2004
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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.
Subject: Asset valuation, Corporate sector, Financial sector, Financial statements, Public sector
Keywords: asset value, asset volatility, bank assets, credit risk, put option, short-term debt, WP
Pages:
43
Volume:
2004
DOI:
Issue:
121
Series:
Working Paper No. 2004/121
Stock No:
WPIEA1212004
ISBN:
9781451854411
ISSN:
1018-5941
