Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/67405
Authors: 
Matros, Philipp
Vilsmeier, Johannes
Year of Publication: 
2012
Series/Report no.: 
Discussion Paper, Deutsche Bundesbank 30/2012
Abstract: 
We estimate time series of option implied Probabilities of Default (PoDs) for 19 major US financial institutions from 2002 to 2012. These PoDs are estimated as mass points of entropy based risk neutral densities and subsequently corrected for maturity dependence. The obtained time series are evaluated with regard to their consistency and predictive power and their properties are compared to Credit Default Swap Spreads (CDS). Moreover, we also derive an indicator for the systemic risk in the US financial sector. We find that the PoDs are superior to CDS in identifying the high risk banks prior to the Lehman crisis.
Subjects: 
Entropy Principle
Risk Neutral Density
Probability of Default
Financial Stability Indicator
Credit Default Swaps
JEL: 
C14
C32
G01
G21
ISBN: 
978-3-86558-860-9
Document Type: 
Working Paper

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