A New Risk Indicator and Stress Testing Tool : A Multifactor Nth-to-Default CDS Basket /

This paper generalizes a market-based indicator for financial sector surveillance using a multifactor latent structure in the determination of the default probabilities of an nth-todefault credit default swap (CDS) basket of large complex financial institutions (LCFIs). To estimate the multifactor l...

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Detalles Bibliográficos
Autor principal: Avesani, Renzo
Otros Autores: Garcia Pascual, Antonio, Li, Jing
Formato: Revista
Lenguaje:English
Publicado: Washington, D.C. : International Monetary Fund, 2006.
Colección:IMF Working Papers; Working Paper ; No. 2006/105
Acceso en línea:Full text available on IMF
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100 1 |a Avesani, Renzo. 
245 1 2 |a A New Risk Indicator and Stress Testing Tool :   |b A Multifactor Nth-to-Default CDS Basket /  |c Renzo Avesani, Jing Li, Antonio Garcia Pascual. 
264 1 |a Washington, D.C. :  |b International Monetary Fund,  |c 2006. 
300 |a 1 online resource (25 pages) 
490 1 |a IMF Working Papers 
500 |a <strong>Off-Campus Access:</strong> No User ID or Password Required 
500 |a <strong>On-Campus Access:</strong> No User ID or Password Required 
506 |a Electronic access restricted to authorized BRAC University faculty, staff and students 
520 3 |a This paper generalizes a market-based indicator for financial sector surveillance using a multifactor latent structure in the determination of the default probabilities of an nth-todefault credit default swap (CDS) basket of large complex financial institutions (LCFIs). To estimate the multifactor latent structure, we link the market risk (the covariance of the LCFIs' equity) to credit risk (the default probability of the CDS basket) in a coherent manner. In addition, to analyze the response of the probabilities of default to changing macroeconomic conditions, we run a stress test by generating shocks to the latent multifactor structure. The results unveil a rich set of default probability dynamics and help in identifying the most relevant sources of risk. We anticipate that this approach could be of value to financial supervisors and risk managers alike. 
538 |a Mode of access: Internet 
700 1 |a Garcia Pascual, Antonio. 
700 1 |a Li, Jing. 
830 0 |a IMF Working Papers; Working Paper ;  |v No. 2006/105 
856 4 0 |z Full text available on IMF  |u http://elibrary.imf.org/view/journals/001/2006/105/001.2006.issue-105-en.xml  |z IMF e-Library