Banks' Risk Dynamics and Distance to Default

• 成果类型: Article
• 署名作者: Nagel, Stefan; Purnanandam, Amiyatosh
• 署名单位: University of Chicago; National Bureau of Economic Research; Center for Economic & Policy Research (CEPR); University of Michigan System; University of Michigan
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhz125
• 发表日期: 2020
• 页码: 2421
• 关键词: deposit insurance; Stress tests; options; debt

摘要

We adapt structural models of default risk to take into account the special nature of bank assets. The usual assumption of lognormally distributed asset values is not appropriate for banks. Typical bank assets are risky debt claims with concave payoffs. Because of the payoff nonlinearity, bank asset volatility rises following negative shocks to borrower asset values. As a result, standard structural models with constant asset volatility can severely understate banks' default risk in good times when asset values are high. Additionally, bank equity return volatility is much more sensitive to negative shocks to asset values than in standard structural models.