Toward a bottom-up approach to assessing sovereign default risk : an update

• Autorzy: Edward I. Altman , Herbert Rijken
• Języki publikacji: EN

Abstrakty

EN

We propose a totally new approach toward assessing sovereign risk by examining rigorously the health and aggregate default risk of a nation's private corporate sector. Models such as our new Z-Metrics™ approach can be utilized to measure the median probability of default of the non-financial sector cumulatively for five years, both as an absolute measure of corporate risk vulnerability and a relative measure compared to other sovereigns and to the market's assessment via the now liquid credit-default-swap market. Specifically, we measure the default probabilities of listed corporate entities in nine European countries, and the U.S.A., as of 2009 and 2010. These periods coincide with the significant rise in concern with sovereign default risk in the Euro country sphere. We conclude that our corporate health index of the private sector measured at periods prior to the explicit recognition by most credit professionals, not only gave an effective early warning indicator but provided a mostly appropriate hierarchy of relative sovereign risk. Policy officials should, we believe, nurture, not penalize, the tax revenue paying and jobs generating private sector when considering austerity measures of distressed sovereigns. (original abstract)

We propose a totally new approach toward assessing sovereign risk by examining rigorously the health and aggregate default risk of a nation's private corporate sector. Models such as our new Z-Metrics™ approach can be utilized to measure the median probability of default of the non-financial sector cumulatively for five years, both as an absolute measure of corporate risk vulnerability and a relative measure compared to other sovereigns and to the market's assessment via the now liquid credit-default-swap market. Specifically, we measure the default probabilities of listed corporate entities in nine European countries, and the U.S.A., as of 2009 and 2010. These periods coincide with the significant rise in concern with sovereign default risk in the Euro country sphere. We conclude that our corporate health index of the private sector measured at periods prior to the explicit recognition by most credit professionals, not only gave an effective early warning indicator but provided a mostly appropriate hierarchy of relative sovereign risk. Policy officials should, we believe, nurture, not penalize, the tax revenue paying and jobs generating private sector when considering austerity measures of distressed sovereigns. (abstrakt oryginalny)

Słowa kluczowe

EN

Analysis of insolvency risk; Insolvency risk analysis methods

PL

Analiza ryzyka niewypłacalności; Metody analizy ryzyka niewypłacalności

• Czasopismo: Journal of Management and Financial Sciences
• Rocznik: 2012
• Tom: 5
• Numer: nr 8
• Strony: 7--29

Twórcy

autor

Edward I. Altman

• New York University Stern School of Business, USA

autor

Herbert Rijken

• Vrije University

Bibliografia

• Abassi B., Taffler R. J., Country Risk: A Model of Economic Performance Related to Debt Servicing Capacity, WP