Ageev V.I.Published in:
Global Markets and Financial Engineering (Russian version)
– Volume 3, Number 4 (October-December 2016)

JEL classification: C58, G21, G32

Keywords: credit default swap, credit risk assessment model, default, derivative financial instrument, risk management, solvency


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Abstract:

The article is a sequel of the author's previous publications "The applicability of CDS for assessing the solvency of financial institutions in the Russian Federation " and "Credit Default Swap Evaluation for Russian Commercial Banks" devoted to the use of credit default swaps (CDS) for assessing the solvency of commercial banks from the group of developing BRICS countries. In this paper we draw a model for estimating the probability of default of a Russian bank taking into account the theoretical values of CDS spreads. The model takes into account not only the fundamental indicators from the reporting, but also considers the market component, which is based on the obtained values of theoretical CDS spreads. In the end of the article we compare the model under study with the existing models for estimating the probability of default; we mark its advantages, disadvantages and possible ways of further improvement.

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References:
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Ageev V.I. (2015). Kreditnyy defoltnyy svop kak instrument otsenki veroyatnosti defolta rossiyskikh kommercheskikh bankov [Credit default swap as an instrument for default probability estimation for Russian commercial banks]. Russian Entrepreneurship. 16 (20). 3399-3424. (in Russian). doi: 10.18334/rp.16.20.1994.
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