Counterparty Risk, Credit Contagion, and Prediction of Financial Distress
|關鍵字:||違約叢集;交易對手風險;違約預測財務危機預測;事件分析;市場反應;結構信用風險模型;Default Clustering;Counterparty Risk;Default Prediction;Event Study;MarketReaction;Structural Credit Risk Model|
探討，繼而採取Jorion 與Zhang (2008)的研究方式，針對市場對於破產宣告中的最大
型的違約預測能力亦可再做進一步的探討，我們主要將Merton(1974)、Black and Cox
The global financial turmoil resulted from the subprime mortgage crisis of 2007 has significantly impacted the financial systems around the world, and raises the importance of portfolio credit risk modeling. Unexplained default clustering is a major issue for traditional credit risk models and could lead to more bank failures in periods of stress, or losses on CDOs that exceed the worst estimates. Therefore, researchers are intended to model the default correlation more realistically in order to improve the portfolio credit risk modeling. Prior researches have been examining several possible structural explanations for default clustering, also called “credit contagion.” Nonetheless, current factor or industry effects in credit risk modeling seem to be unable to reproduce the actual pattern of default clustering. Therefore, our study aims at one particular different channel of credit contagion, which is counterparty credit risk. The empirical evidences on counterparty risk are rare due to the availability of data and the difficulties in identifying direct business links between companies. This paper will first review theoretical and empirical studies of default correlation, credit contagion, and counterparty risk. Next, we will follow the pioneered work by Jorion and Zhang (2008) and examine the market reaction of the top unsecured creditors in bankruptcy filings. Thirdly, the financial distress of creditor firms subsequent to the loss of the filing of bankruptcy is only preliminarily analyzed by Jorion and Zhang (2008) in terms of the number and fraction of firms that were delisted or downgraded within one and two years. In our empirical study, we will investigate the relationship between the changes in default probabilities implied by the structural models and the subsequent events of financial distress of creditors. This is the attempt to construct a direct linkage between counterparty risk and financial distress. Furthermore, the default prediction capabilities of various structural models can also be explored further. In addition to the commonly used KMV-Merton default probability (which is commonly regarded as the volatility-adjusted leverage), we will also incorporate additional features of the well-developed structural model literature, including the exogenous default boundary (Black and Cox (1976)) as well as the endogenous default boundary (Leland (1994)) models. These structural models have been shown to be able to improve default prediction capabilities (Chen, Hu, and Pan (2006) and Chen, Lee, and Lee (2008)).
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