The End: A New Indicator of Financial and Nonfinancial Corporate Sector Vulnerability
Jorge A. Chan-Lau
International Monetary Fund (IMF) - International Capital Markets Department; Tufts University - Fletcher School of Law and Diplomacy
Government of Canada - Financial Markets Department
IMF Working Paper No. 05/231
This paper describes a corporate sector vulnerability indicator, the expected number of defaults (END), based on the joint occurrence of defaults among a number of firms and/or institutions. The END indicator is general enough to assess systemic risk in the corporate and financial sectors, as well as systemic sovereign risk; and is also forward looking as it is constructed using information implied by financial securities prices. Using equity prices and balance-sheet data, we calculate the END to assess systemic risk in the corporate sector in Korea, Malaysia, and Thailand. We also discuss how the END systemic risk indicator overcomes some of the shortcomings of other vulnerability indicators.
Number of Pages in PDF File: 17
Keywords: Systemic Risk, Credit Risk, Corporate Vulnerability, Default Probability
JEL Classification: F30, G12, G14, G15working papers series
Date posted: January 17, 2006
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