Currency mismatches and corporate default risk
Subtitle: modeling, measurement, and surveillance applications
By: prepared by Jorge A. Chan-Lau and Andre O. Santos.
Contributors: Santos, André.; International Monetary Fund. Monetary and Capital Markets Dept.
Series: IMF working paper -- WP/06/269
Publisher: International Monetary Fund
Published: 2006
Place of publication: [Washington, D.C.]
Language: eng
Number of pages: 30
Subjects: Default (Finance) -- Econometric models.; Foreign exchange rates -- Econometric models.; Loans, Foreign -- Econometric models.; Financial crises -- Econometric models.
Description: Currency mismatches in corporate balance sheets have been singled out as an important factor underlying the severity of recent financial crises. We propose several structural models for measuring default risk for firms with currency mismatches in their asset/liability structure. The proposed models can be adapted to different exchange rate regimes, are analytically tractable, and can be estimated using available equity price and balance sheet data. The paper provides a detailed explanation on how to calibrate the models and discusses two applications to financial surveillance: the measurement of systematic risk in the corporate sector and the estimation of prudential leverage ratios consistent with regulatory capital ratios in the banking sector.
Notes: Caption title.

"December 2006."

Includes bibliographical references (p. 27-30).

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