The Exposure of the Nordic Banking Sector against Global Macroeconomic Factors  A Time Series Study on Probability of Default
(2016) NEKP03 20161Department of Economics
 Abstract
 Business cycles and changes in macroeconomic variables can have a huge influence on the profitability and credit exposure of an individual bank. Consequently, they affect the risk profile of a given bank. This study uses multifactor time series regressions to examine the influence of global macroeconomic variables on the probability of default for Nordic banks, both on industry level and on individual level. Zscores are used to estimate the probability of default. Quarterly analysis is performed with probability of default as the dependent variable and macroeconomic variables as independent variables. The study is performed for the period from 2000 to 2014. The paper finds that the global macroeconomic variables that have the highest... (More)
 Business cycles and changes in macroeconomic variables can have a huge influence on the profitability and credit exposure of an individual bank. Consequently, they affect the risk profile of a given bank. This study uses multifactor time series regressions to examine the influence of global macroeconomic variables on the probability of default for Nordic banks, both on industry level and on individual level. Zscores are used to estimate the probability of default. Quarterly analysis is performed with probability of default as the dependent variable and macroeconomic variables as independent variables. The study is performed for the period from 2000 to 2014. The paper finds that the global macroeconomic variables that have the highest influence on the probability of default for the Nordic banking sector are industrial production and unemployment. The Nordic banking sector is not as homogenous as expected, since the banks are affect ed by the variables differently. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/studentpapers/record/8879527
 author
 Sarmes, Aleksandra ^{LU} and Lundström, Johan ^{LU}
 supervisor

 Birger Nilsson ^{LU}
 organization
 course
 NEKP03 20161
 year
 2016
 type
 H2  Master's Degree (Two Years)
 subject
 keywords
 Probability of default, zscore models, banking sector, Nordics, global factors, macroeconomy
 language
 English
 id
 8879527
 date added to LUP
 20160613 13:13:38
 date last changed
 20160613 13:13:38
@misc{8879527, abstract = {Business cycles and changes in macroeconomic variables can have a huge influence on the profitability and credit exposure of an individual bank. Consequently, they affect the risk profile of a given bank. This study uses multifactor time series regressions to examine the influence of global macroeconomic variables on the probability of default for Nordic banks, both on industry level and on individual level. Zscores are used to estimate the probability of default. Quarterly analysis is performed with probability of default as the dependent variable and macroeconomic variables as independent variables. The study is performed for the period from 2000 to 2014. The paper finds that the global macroeconomic variables that have the highest influence on the probability of default for the Nordic banking sector are industrial production and unemployment. The Nordic banking sector is not as homogenous as expected, since the banks are affect ed by the variables differently.}, author = {Sarmes, Aleksandra and Lundström, Johan}, keyword = {Probability of default,zscore models,banking sector,Nordics,global factors,macroeconomy}, language = {eng}, note = {Student Paper}, title = {The Exposure of the Nordic Banking Sector against Global Macroeconomic Factors  A Time Series Study on Probability of Default}, year = {2016}, }