Artikel
Market microstructure effects on firm default risk evaluation
Default probability is a fundamental variable determining the credit worthiness of a firm and equity volatility estimation plays a key role in its evaluation. Assuming a structural credit risk modeling approach, we study the impact of choosing different non parametric equity volatility estimators on default probability evaluation, when market microstructure noise is considered. A general stochastic volatility framework with jumps for the underlying asset dynamics is defined inside a Merton-like structural model. To estimate the volatility risk component of a firm we use high-frequency equity data: market microstructure noise is introduced as a direct effect of observing noisy high-frequency equity prices. A Monte Carlo simulation analysis is conducted to (i) test the performance of alternative non-parametric equity volatility estimators in their capability of filtering out the microstructure noise and backing out the true unobservable asset volatility; (ii) study the effects of different non-parametric estimation techniques on default probability evaluation. The impact of the non-parametric volatility estimators on risk evaluation is not negligible: a sensitivity analysis defined for alternative values of the leverage parameter and average jumps size reveals that the characteristics of the dataset are crucial to determine which is the proper estimator to consider from a credit risk perspective.
- Sprache
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Englisch
- Erschienen in
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Journal: Econometrics ; ISSN: 2225-1146 ; Volume: 4 ; Year: 2016 ; Issue: 3 ; Pages: 1-31 ; Basel: MDPI
- Klassifikation
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Wirtschaft
Estimation: General
Financial Econometrics
Financial Forecasting and Simulation
Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
Bankruptcy; Liquidation
- Thema
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structural models
default probability
stochastic volatility
jumps
non-parametric volatility estimation
high-frequency data
- Ereignis
-
Geistige Schöpfung
- (wer)
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Barsotti, Flavia
Sanfelici, Simona
- Ereignis
-
Veröffentlichung
- (wer)
-
MDPI
- (wo)
-
Basel
- (wann)
-
2016
- DOI
-
doi:10.3390/econometrics4030031
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:42 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Artikel
Beteiligte
- Barsotti, Flavia
- Sanfelici, Simona
- MDPI
Entstanden
- 2016
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