Reference : Predicting default probability and the default recovery ratio: evidence from the Leba...
Scientific journals : Article
Business & economic sciences : Finance
Predicting default probability and the default recovery ratio: evidence from the Lebanese external public debt
El Khoury, Ghada [Université de Liège - ULiège > HEC-Ecole de gestion > HEC-Ecole de gestion > >]
Colmant, Bruno mailto [> >]
Corhay, Albert mailto [Université de Liège - ULiège > Services administratifs généraux > Comptabilité et finance - Vice-Recteur >]
International Research Journal, "Banks and Bank Systems"
Business Persepectives
Dzerzhynsky lane
[en] implied default probability ; recovery ratio ; credit spread ; sovereign debt ; market price
[en] With a national debt exceeding 190% of the GDP at the end of 2006, the Lebanese
government is in a difficult situation. The literature on emerging markets reveals the
various causes that might lead to a default on their public debt. The first objective of this
paper is to analyze the evolution of the credit spread for the Lebanese US Dollar
Eurobonds. The second objective is to extract both the implied default recovery ratio and
the risk neutral default probability term structure for the Lebanese US dollar Eurobonds
between October 2001 and November 2004. Our results show that the recovery ratio is
strongly related to the market reaction linked to political and economic tension within
Lebanon. For the period after the Paris II conference in November 2002, the average
estimates show a decline in the default probability for the long-term period accompanied by
an increase in the default recovery ratio.
Centre de recherche d'HEC- école de gestion de l'université de Liège
Particularité de la situation macro-économique au Liban: Evaluation du nouvel accord de Bâle II sur les fonds propres des banques libanaises et analyse critique de son effet sur l’exposition du système financier au risque de crédit.
Researchers ; Professionals ; General public

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