The Assessment of the Default Risk for the Banks of the Romanian Banking System

Sorin Mădălin Vlad; Gheorghe Ruxanda

doi:doi:10.11648/j.ijefm.20150301.11

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The Assessment of the Default Risk for the Banks of the Romanian Banking System

Sorin Mădălin Vlad, Gheorghe Ruxanda

Published in International Journal of Economics, Finance and Management Sciences (Volume 3, Issue 1)

Received: 25 December 2014 Accepted: 10 January 2015 Published: 21 January 2015

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Abstract

By the current study we analyze the performance and plausibility of the empirical results provided by the [5] Duffie and Lando (2001) credit risk structural model with asymmetric information. By construction, such a model can allow the endogenous understanding of the default event (typically for a structural model), the plausibility of the default intensity existence (typically for a reduced form model), as well as the tractability of analytical formulas to be used at the estimation of the credit risk parameters. Under this framework we analyze the empirical model results, by the quantitative creditworthiness assessment of the banks from the Romanian banking system, as financial institutions of a low default portfolio. For the model implementation we apply a special calibration approach for the accounting white noise parameter. The empirical study is being conducted by the use of the banks’ financial statement time series over the last Romanian economic cycle, during the period 2002 – 2012.

Published in	International Journal of Economics, Finance and Management Sciences (Volume 3, Issue 1)
DOI	10.11648/j.ijefm.20150301.11
Page(s)	1-9
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Default, Information Asymmetry, Default Probability, Default Intensity, Banks’ Assessment

References

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[3]	F. Black, J.C. Cox, „Valuing Corporate Securities: Some Effects of Bond Indenture Provisions”, Journal of Finance, 351 - 367, 1976.
[4]	C. Capuano, et all, “Recent Advances in Credit Risk Modeling”, International Monetary Fund, Working Paper, 2009.
[5]	D. Duffie, D. Lando, „Term Structures of Credit Spreads with Incomplete Accounting Information”, Econometrica 69(3), 633–664, 2001.
[6]	D. Duffie, L.H. Pedersen, Singleton K.J., „Modeling Sovereign Yield Spreads: A Case Study of Russian Debt”, Journal of Finance 58(1), 119–159, 2003.
[7]	D. Duffie, K.J. Singleton, „Modeling Term Structures of Defaultable Bonds”, Review of Financial Studies 12, 687–720, 1999.
[8]	D. Duffie, K.J. Singleton, „Credit Risk: Pricing, Measurement and Management”, Princeton Series in Finance, 2003.
[9]	H. Fan, S. Sundaresan, „Debt Valuation, Renegotiation, and Optimal Dividend Policy", Review of Financial Studies, 13, 1057-1099, 2000.
[10]	E. Fischer, R. Heinkel, J. Zechner, "Dynamic Capital Structure Choice: Theory and Tests", Joumal of Finance, 44, 19-40, 1989.
[11]	H.E.Leland,„Corporate Debt Value, Bond Covenants, and Optimal Capital Structure”, Journal of Finance 49, 1213 - 1252, 1994.
[12]	H.E. Leland, „Agency Costs, Risk Management, and Capital Structure", Journal of Finance, 53, 1213-1242, 1998.
[13]	H.E. Leland, K. Toft, „Optimal Capital Structure, Endogenous Bankruptcy and the Term Structure of Credit Spreads”, Journal of Finance 51, 987 – 1019, 1996.
[14]	P. Mella-Barral, W. Perraudin, „Strategic Debt Service”, Journal of Finance 52, 531 – 556, 1997.
[15]	P. Mella-Barral, "Dynamics of Default and Debt Reorganization", Review of Financial Studies, 12, 535-578, 1999.
[16]	R.C. Merton, „On the Pricing of Corporate Debt: The Risk Structure of Interest Rates”, Journal of Finance 29, 449 – 470, 1974.
[17]	H. Uhrig, "Endogenous Bankruptcy when Issuance is Costly", Working Paper, Department of Finance, University of Mannheim, 1998.
[18]	S. M. Vlad, „Empirical Evidence: Complete vs. Incomplete Information Credit Risk Models”, Journal of Economic Computation and Economic Cybernetics Studies and Research 2, 206 - 218, 2010.
[19]	G. Ruxanda, S. M. Vlad, “Evaluarea bancilor BCR, BRD folosind un model structural de risc de credit cu informatie asimetrica”, Journal of Economic Computation and Economic Cybernetics Studies and Research, RO 3 - 4, 5 – 16, 2012.

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APA Style

Sorin Mădălin Vlad, Gheorghe Ruxanda. (2015). The Assessment of the Default Risk for the Banks of the Romanian Banking System. International Journal of Economics, Finance and Management Sciences, 3(1), 1-9. https://doi.org/10.11648/j.ijefm.20150301.11

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ACS Style

Sorin Mădălin Vlad; Gheorghe Ruxanda. The Assessment of the Default Risk for the Banks of the Romanian Banking System. Int. J. Econ. Finance Manag. Sci. 2015, 3(1), 1-9. doi: 10.11648/j.ijefm.20150301.11

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AMA Style

Sorin Mădălin Vlad, Gheorghe Ruxanda. The Assessment of the Default Risk for the Banks of the Romanian Banking System. Int J Econ Finance Manag Sci. 2015;3(1):1-9. doi: 10.11648/j.ijefm.20150301.11

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@article{10.11648/j.ijefm.20150301.11,
  author = {Sorin Mădălin Vlad and Gheorghe Ruxanda},
  title = {The Assessment of the Default Risk for the Banks of the Romanian Banking System},
  journal = {International Journal of Economics, Finance and Management Sciences},
  volume = {3},
  number = {1},
  pages = {1-9},
  doi = {10.11648/j.ijefm.20150301.11},
  url = {https://doi.org/10.11648/j.ijefm.20150301.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20150301.11},
  abstract = {By the current study we analyze the performance and plausibility of the empirical results provided by the [5] Duffie and Lando (2001) credit risk structural model with asymmetric information. By construction, such a model can allow the endogenous understanding of the default event (typically for a structural model), the plausibility of the default intensity existence (typically for a reduced form model), as well as the tractability of analytical formulas to be used at the estimation of the credit risk parameters. Under this framework we analyze the empirical model results, by the quantitative creditworthiness assessment of the banks from the Romanian banking system, as financial institutions of a low default portfolio. For the model implementation we apply a special calibration approach for the accounting white noise parameter. The empirical study is being conducted by the use of the banks’ financial statement time series over the last Romanian economic cycle, during the period 2002 – 2012.},
 year = {2015}
}

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TY  - JOUR
T1  - The Assessment of the Default Risk for the Banks of the Romanian Banking System
AU  - Sorin Mădălin Vlad
AU  - Gheorghe Ruxanda
Y1  - 2015/01/21
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N1  - https://doi.org/10.11648/j.ijefm.20150301.11
DO  - 10.11648/j.ijefm.20150301.11
T2  - International Journal of Economics, Finance and Management Sciences
JF  - International Journal of Economics, Finance and Management Sciences
JO  - International Journal of Economics, Finance and Management Sciences
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PB  - Science Publishing Group
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AB  - By the current study we analyze the performance and plausibility of the empirical results provided by the [5] Duffie and Lando (2001) credit risk structural model with asymmetric information. By construction, such a model can allow the endogenous understanding of the default event (typically for a structural model), the plausibility of the default intensity existence (typically for a reduced form model), as well as the tractability of analytical formulas to be used at the estimation of the credit risk parameters. Under this framework we analyze the empirical model results, by the quantitative creditworthiness assessment of the banks from the Romanian banking system, as financial institutions of a low default portfolio. For the model implementation we apply a special calibration approach for the accounting white noise parameter. The empirical study is being conducted by the use of the banks’ financial statement time series over the last Romanian economic cycle, during the period 2002 – 2012.
VL  - 3
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ER  -

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Author Information

Sorin Mădălin Vlad
Gheorghe Ruxanda

Department of Economic Cybernetics, Bucharest Academy of Economic Studies, Bucharest, Romania

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APA Style

Sorin Mădălin Vlad, Gheorghe Ruxanda. (2015). The Assessment of the Default Risk for the Banks of the Romanian Banking System. International Journal of Economics, Finance and Management Sciences, 3(1), 1-9. https://doi.org/10.11648/j.ijefm.20150301.11

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ACS Style

Sorin Mădălin Vlad; Gheorghe Ruxanda. The Assessment of the Default Risk for the Banks of the Romanian Banking System. Int. J. Econ. Finance Manag. Sci. 2015, 3(1), 1-9. doi: 10.11648/j.ijefm.20150301.11

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AMA Style

Sorin Mădălin Vlad, Gheorghe Ruxanda. The Assessment of the Default Risk for the Banks of the Romanian Banking System. Int J Econ Finance Manag Sci. 2015;3(1):1-9. doi: 10.11648/j.ijefm.20150301.11

Copy | Download

@article{10.11648/j.ijefm.20150301.11,
  author = {Sorin Mădălin Vlad and Gheorghe Ruxanda},
  title = {The Assessment of the Default Risk for the Banks of the Romanian Banking System},
  journal = {International Journal of Economics, Finance and Management Sciences},
  volume = {3},
  number = {1},
  pages = {1-9},
  doi = {10.11648/j.ijefm.20150301.11},
  url = {https://doi.org/10.11648/j.ijefm.20150301.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20150301.11},
  abstract = {By the current study we analyze the performance and plausibility of the empirical results provided by the [5] Duffie and Lando (2001) credit risk structural model with asymmetric information. By construction, such a model can allow the endogenous understanding of the default event (typically for a structural model), the plausibility of the default intensity existence (typically for a reduced form model), as well as the tractability of analytical formulas to be used at the estimation of the credit risk parameters. Under this framework we analyze the empirical model results, by the quantitative creditworthiness assessment of the banks from the Romanian banking system, as financial institutions of a low default portfolio. For the model implementation we apply a special calibration approach for the accounting white noise parameter. The empirical study is being conducted by the use of the banks’ financial statement time series over the last Romanian economic cycle, during the period 2002 – 2012.},
 year = {2015}
}

Copy | Download

TY  - JOUR
T1  - The Assessment of the Default Risk for the Banks of the Romanian Banking System
AU  - Sorin Mădălin Vlad
AU  - Gheorghe Ruxanda
Y1  - 2015/01/21
PY  - 2015
N1  - https://doi.org/10.11648/j.ijefm.20150301.11
DO  - 10.11648/j.ijefm.20150301.11
T2  - International Journal of Economics, Finance and Management Sciences
JF  - International Journal of Economics, Finance and Management Sciences
JO  - International Journal of Economics, Finance and Management Sciences
SP  - 1
EP  - 9
PB  - Science Publishing Group
SN  - 2326-9561
UR  - https://doi.org/10.11648/j.ijefm.20150301.11
AB  - By the current study we analyze the performance and plausibility of the empirical results provided by the [5] Duffie and Lando (2001) credit risk structural model with asymmetric information. By construction, such a model can allow the endogenous understanding of the default event (typically for a structural model), the plausibility of the default intensity existence (typically for a reduced form model), as well as the tractability of analytical formulas to be used at the estimation of the credit risk parameters. Under this framework we analyze the empirical model results, by the quantitative creditworthiness assessment of the banks from the Romanian banking system, as financial institutions of a low default portfolio. For the model implementation we apply a special calibration approach for the accounting white noise parameter. The empirical study is being conducted by the use of the banks’ financial statement time series over the last Romanian economic cycle, during the period 2002 – 2012.
VL  - 3
IS  - 1
ER  -

Copy | Download