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The Contingent Claims Approach to Corporate Vulnerability Analysis: Estimating Default Risk and Economy-Wide Risk Transfer

Author

Listed:
  • Ms. Yingbin Xiao
  • Mr. Dale F Gray
  • Cheng Hoon Lim
  • Michael T. Gapen

Abstract

In this paper, we examine the ability of the contingent claims approach (CCA) to identify corporate sector and economy-wide vulnerabilities. We apply the Moody's MfRisk model, which uses aggregated CCA principles, to assess vulnerabilities retroactively in two historical country cases. The results indicate that the method may prove helpful in identifying corporate sector vulnerabilities and estimating the associated value of risk transfer across interrelated balance sheets of the corporate, financial, and public sectors.

Suggested Citation

  • Ms. Yingbin Xiao & Mr. Dale F Gray & Cheng Hoon Lim & Michael T. Gapen, 2004. "The Contingent Claims Approach to Corporate Vulnerability Analysis: Estimating Default Risk and Economy-Wide Risk Transfer," IMF Working Papers 2004/121, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2004/121
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    References listed on IDEAS

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