{"title":"Bank insolvency risk, Z-score measures and unimodal returns: A refinement","authors":"","doi":"10.1016/j.qref.2024.101919","DOIUrl":null,"url":null,"abstract":"<div><p>We develop refined probability bounds for bank insolvency risk measures based on the Z-score, analogous to those given by Cantelli’s inequality under the additional assumption of unimodality of returns, drawing on the one-sided Vysochanskii-Petunin inequality. Illustrating empirically for US banks, we argue that (i) unimodality of returns is not an overly restrictive assumption in this context, and (ii) the refined measures provide a less conservative alternative to insolvency probability bounds drawing on the (two-sided) Vysochanskii-Petunin inequality, particularly for banks with higher levels of insolvency risk.</p></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":null,"pages":null},"PeriodicalIF":2.9000,"publicationDate":"2024-09-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S106297692400125X/pdfft?md5=1da907565b2e147df500a339c7581a80&pid=1-s2.0-S106297692400125X-main.pdf","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Quarterly Review of Economics and Finance","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S106297692400125X","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
We develop refined probability bounds for bank insolvency risk measures based on the Z-score, analogous to those given by Cantelli’s inequality under the additional assumption of unimodality of returns, drawing on the one-sided Vysochanskii-Petunin inequality. Illustrating empirically for US banks, we argue that (i) unimodality of returns is not an overly restrictive assumption in this context, and (ii) the refined measures provide a less conservative alternative to insolvency probability bounds drawing on the (two-sided) Vysochanskii-Petunin inequality, particularly for banks with higher levels of insolvency risk.
期刊介绍:
The Quarterly Review of Economics and Finance (QREF) attracts and publishes high quality manuscripts that cover topics in the areas of economics, financial economics and finance. The subject matter may be theoretical, empirical or policy related. Emphasis is placed on quality, originality, clear arguments, persuasive evidence, intelligent analysis and clear writing. At least one Special Issue is published per year. These issues have guest editors, are devoted to a single theme and the papers have well known authors. In addition we pride ourselves in being able to provide three to four article "Focus" sections in most of our issues.