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An alternative way of estimating asset values and asset value correlations

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Author

Summary, in English

Abstract in Undetermined
We suggest a new way of modeling the dynamics of a firm’s asset value and discuss how it could be useful in the computation of asset value correlations in multivariate credit risk models. The method relies on credit spreads from the credit default swap market and by combining these spreads with stock prices and leverage ratios we show how one can construct a proxy for the asset value. This proxy is then used to calculate asset value correlations among a group of major European banks selected from the stress test conducted by the Committee of European Banking Supervisors (CEBS) in 2010. The asset correlations are presented as a function of the banks’ size, default risk and geographic location.

Publishing year

2011

Language

English

Pages

30-38

Publication/Series

Journal of Fixed Income

Volume

21

Issue

2

Document type

Journal article

Publisher

Portfolio Management Research

Topic

  • Economics

Keywords

  • asset correlation
  • asset value
  • credit default swap
  • stress test
  • banks

Status

Published

ISBN/ISSN/Other

  • ISSN: 1059-8596