Extracting leading indicators of bank fragility from market prices : Estonia focus

Arbeitspapier

Banking reform has proved to be one of the most problematic elements of economic transition in central and Eastern Europe. Therefore the paper considers the development of the Estonian banking sector and derives individual banks´ fragility scores during transition. To this end we use option-based tools and equity prices to estimate distance-to-default measures of banks´ distress probabilities. Overall, the results suggest that market indicators are moderately useful for anticipating future financial distress and rating changes in transition economies. The implication for an effective supervisory framework is to use a plurality of risk scores when assessing bank vulnerability.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 1647

Classification and Topics

• Classification: Wirtschaft ; Central Banks and Their Policies ; Financial Markets and the Macroeconomy ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages
• Subject: banking ; financial stability ; bank fragility ; options ; Estonia ; Bankenkrise ; Prognoseverfahren ; Bankrisiko ; Bankinsolvenz ; Übergangswirtschaft ; Optionspreistheorie ; Schätzung ; Estland

Contributors, Location and Time

• Event: Geistige Schöpfung
• (who): Chen, Yu-Fu ; Funke, Michael ; Männasoo, Kadri
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/19111
• Last update: 20.09.2024, 8:21 AM CEST