Idiosyncratic and Systemic Risk in the European Corporate Sector: A CDO Perspective
IMF Working Papers, April 1, 2006
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- Idiosyncratic and Systemic Risk in the European Corporate Sector: A CDO Perspective
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Bibliographic details
- Authors: Miss Yinqiu Lu, Jorge A Chan-Lau
- Published: April 1, 2006
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451863673.001
Authors and Publication
- By Yinqiu Lu, Jorge A Chan-Lau
- April 1, 2006
- IMF Working Papers, Working Paper No. 2006/107
- Issue: 107
- Volume: 2006
- Pages: 18
- DOI: https://doi.org/10.5089/9781451863673.001
- Stock No: WPIEA2006107
- ISBN: 9781451863673
- ISSN: 1018-5941
Research objective and motivation
- Systemic risk remains a major concern to policymakers because widespread defaults in the corporate and financial sectors could pose substantial costs to society.
- Forward-looking measures and/or indicators of systemic default risk are needed to identify potential buildups of vulnerability in advance.
- The paper explains how to construct idiosyncratic and systemic default risk indicators using information embedded in single-tranche standardized collateralized debt obligations (STCDOs) referencing credit derivatives indices.
Methodology (constructing risk indicators)
- Use information embedded in single-tranche standardized collateralized debt obligations (STCDOs) referencing credit derivatives indices to construct:
- Idiosyncratic default risk indicators
- Systemic default risk indicators
Illustration / Application
- Both idiosyncratic and systemic risk indicators are constructed for the European corporate sector.
- Data source for illustration: midprice quotes for STCDOs referencing the iTraxx Europe index.
Subject areas and keywords
- Subject: CDOs, Credit, Currencies, Stocks, Systemic risk
- Keywords: credit derivative, equity tranche, investor, portfolio, tranche, WP
Notes and disclaimers from the publication
- 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.
Idiosyncratic and Systemic Risk in the European Corporate Sector: A CDO Perspective, IMF Working Paper No. 2006/107 (April 1, 2006).
Content in this bundle
- 1. U.S. Cash CDO Issuance