%0 Report
%A Singh, Manish K.
%A Gómez-Puig, Marta
%A Sosvilla-Rivero, Simón
%T Forward looking banking stress in EMU countries
%J Working Papers on International Economics and Finance
%D 2014
%@ 1696-6376
%U https://hdl.handle.net/20.500.14352/41632
%X Based on contingent claims analysis(CCA), this paper tries to estimate the systemic risk build-up in the European Economic and Monetary Union (EMU) countries using a market based measure "distance-to-default"(DtD). It analyzes the individual and aggregated series for a comprehensive set of banks in each eurozone country over the period 2004-Q4 to 2013-Q2. Given the structural differences in financial sector and banking regulations at national level, the indices provide a useful indicator for monitoring country specific banking vulnerability and stress. We find that average DtD indicators are intuitive, forward-looking and timely risk indicators. The underlying trend, fluctuations and correlations among indices help us analyze the interdependence while cross-sectional differences in DtD prior to crisis suggest banking sector fragility in peripheral EMU countries.
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