Hidden Bibliographic Details
| Other authors / contributors: | Youssef, Karim, author.
International Monetary Fund. Strategy, Policy, and Review Department, issuing body.
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| ISBN: | 1283554143
9781283554145
9781455202126
1455202126
9781455202249
145520224X
9781455246519
1455246514
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| Notes: | Includes bibliographical references.
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| Summary: | Probability of default (PD) measures have been widely used in estimating potential losses of, and contagion among, large financial institutions. In a period of financial stress however, the existing methods to compute PDs and generate loss estimates that may vary significantly. This paper discusses three issues that should be taken into account in using PD-based methodologies for loss or contagion analyses: i the use of - risk-neutral probabilities - vs.-real-world probabilities; - ii the divergence between movements in credit and equity markets during periods of financial stress; and iii the assumption of stochastic vs. fixed recovery for financial institutions assets. All three elements have nontrivial implications for providing an accurate estimate of default probabilities and associated losses as inputs for setting policies related to large banks in distress.
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| Other form: | Print version: Singh, Manmohan. Price of Risk - Recent Evidence from Large Financials. Washington : International Monetary Fund, ©2010 9781455202249
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