Please use this identifier to cite or link to this item: https://hdl.handle.net/20.500.11851/6660
Title: Estimating volatility clustering and variance risk premium effects on bank default indicators
Authors: Kenç, Turalay
Çevik, Emrah İsmail
Keywords: Default risk
Structural credit risk
GARCH option pricing
Banking
Variance risk premiums
Issue Date: 2021
Publisher: Springer
Abstract: Default risk increases substantially during financial stress times due to mainly the two reasons: volatility clustering and investors' desire to protect themselves from such increases in volatility. It manifested in the aftermath of the Global Financial Crisis of 2008-2009 with unpleasant outcomes of many bankruptcies and severe financial distress. To account for these features, we adapted the structural credit risk approach to include both time-varying (return) volatility and risk premium about the return volatility itself. By applying the model to US banks, we obtain better bank default indicators in comparison to the benchmark models.
URI: https://doi.org/10.1007/s11156-021-00981-6
https://hdl.handle.net/20.500.11851/6660
ISSN: 0924-865X
1573-7179
Appears in Collections:İşletme Bölümü / Department of Management
Scopus İndeksli Yayınlar Koleksiyonu / Scopus Indexed Publications Collection
WoS İndeksli Yayınlar Koleksiyonu / WoS Indexed Publications Collection

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