01964cas a2200253 a 4500 AALejournalIMF006682 230101c9999 xx r poo 0 0eng d 5.00 USD 9781455202249 1018-5941 BD-DhAAL BD-DhAAL Singh, Manmohan. Price of Risk : Recent Evidence From Large Financials / Manmohan Singh, Karim Youssef. Washington, D.C. : International Monetary Fund, 2010. 1 online resource (12 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Probability of default (PD) measures have been widely used in estimating potential losses of, and contagion among, large financial institutions. In a period of financial stress however, the existing methods to compute PDs and generate loss estimates that may vary significantly. This paper discusses three issues that should be taken into account in using PD-based methodologies for loss or contagion analyses: (i) the use of - risk-neutral probabilities - vs. -real-world probabilities; - (ii) the divergence between movements in credit and equity markets during periods of financial stress; and (iii) the assumption of stochastic vs. fixed recovery for financial institutions' assets. All three elements have nontrivial implications for providing an accurate estimate of default probabilities and associated losses as inputs for setting policies related to large banks in distress. Mode of access: Internet Youssef, Karim. IMF Working Papers; Working Paper ; No. 2010/190 Full text available on IMF http://elibrary.imf.org/view/journals/001/2010/190/001.2010.issue-190-en.xml IMF e-Library