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Systemic risk analysis and option-based theory and information

Publication Year 
2012
Abstract 
This article describes the methodology to compute and the properties of aggregated and forward-looking Distance-to-Default series. These are a set of two market-based indicators to monitor systemic risk in the European banking system based on Contingent Claims Analysis and constructed using information of banks’ balance sheets and equity and option quotes. These indicators are generated using information from systemically important banks and the STOXX Europe 600 Banks Index and provide methodological advantages in monitoring vulnerabilities in the banking system over time.
Document link 
Journal (repec) 
Economic Studies
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