Bottom-Up Default Analysis of Corporate Solvency Risk: An Application to Latin America
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Summary:
This paper suggests a novel approach to assess corporate sector solvency risk. The approach uses a Bottom-Up Default Analysis that projects probabilities of default of individual firms conditional on macroeconomic conditions and financial risk factors. This allows a direct macro-financial link to assessing corporate performance and facilitates what-if scenarios. When extended with credit portfolio techniques, the approach can also assess the aggregate impact of changes in firm solvency risk on creditor banks’ capital buffers under different macroeconomic scenarios. As an illustration, we apply this approach to the corporate sector of the five largest economies in Latin America.
Series:
Working Paper No. 2017/133
Subject:
Asset and liability management Banking Commercial banks Commodity prices Corporate sector Economic sectors Financial institutions Liquidity indicators Liquidity management Loans Prices
English
Publication Date:
June 8, 2017
ISBN/ISSN:
9781484302811/1018-5941
Stock No:
WPIEA2017133
Pages:
33
Please address any questions about this title to publications@imf.org