Journal Article
Market indicators, bank fragility, and indirect market discipline
Abstract: As a theoretical matter, signals from the bond and equity markets satisfy minimal requirements for a useful indicator. Using option pricing formulas, it is shown that a distance to default measure, based on equity market value and equity volatility, increases with the market value of bank assets and decreases with bank leverage and equity volatility.
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File(s): File format is application/pdf https://www.newyorkfed.org/medialibrary/media/research/epr/04v10n2/0409Grop.pdf
Bibliographic Information
Provider: Federal Reserve Bank of New York
Part of Series: Economic Policy Review
Publication Date: 2004
Issue: Sep
Pages: 53-62
Order Number: v.10 no.2