Measuring Corporate Sector Credit Risk Using Stock Prices and Capital Structure

Lee, Seung Hwan

Korean Journal of Financial Studies 2010;39(3):341-366.
Published online September 30, 2010.

Seung Hwan Lee

주가와 재무구조 정보를 이용한 기업부문 신용리스크 측정

이승환

Abstract

This paper improves credit risk assessment of the corporate sector by estimating default probabilities and asset correlations based on the stock prices and the debt structures of individual firms. This method allow us to measure the systematic risk which is not captured by other credit risk indicators such as corporate bond credit spreads. We also analyze the corporate sector credit risk in Korea using our method. We find that the rise of credit risk during the 1997 currency crisis was attributable to increase in the default probabilities of individual firms while the rise of credit risk during the 2008 global financial crisis was mainly caused by common risk factors.

Key Words: 금융위기,도산확률,신용리스크,자산상관관계,체계적 리스크,Asset Correlation,Credit Risk,Default Probability,Financial Crisis,Systematic risk