Arbeitspapier
Measuring option implied degree of distress in the US financial sector using the entropy principle
We estimate time series of option implied Probabilities of Default (PoDs) for 19 major US financial institutions from 2002 to 2012. These PoDs are estimated as mass points of entropy based risk neutral densities and subsequently corrected for maturity dependence. The obtained time series are evaluated with regard to their consistency and predictive power and their properties are compared to Credit Default Swap Spreads (CDS). Moreover, we also derive an indicator for the systemic risk in the US financial sector. We find that the PoDs are superior to CDS in identifying the high risk banks prior to the Lehman crisis.
- ISBN
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978-3-86558-860-9
- Language
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Englisch
- Bibliographic citation
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Series: Bundesbank Discussion Paper ; No. 30/2012
- Classification
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Wirtschaft
Semiparametric and Nonparametric Methods: General
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
Financial Crises
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- Subject
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Entropy Principle
Risk Neutral Density
Probability of Default
Financial Stability Indicator
Credit Default Swaps
- Event
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Geistige Schöpfung
- (who)
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Matros, Philipp
Vilsmeier, Johannes
- Event
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Veröffentlichung
- (who)
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Deutsche Bundesbank
- (where)
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Frankfurt a. M.
- (when)
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2012
- Handle
- Last update
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10.03.2025, 11:42 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Matros, Philipp
- Vilsmeier, Johannes
- Deutsche Bundesbank
Time of origin
- 2012
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