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Eurasian Economic Review

, Volume 4, Issue 1, pp 81–98 | Cite as

The probability of default in Russian banking

  • Alexander M. KarminskyEmail author
  • Alexander Kostrov
Original Paper

Abstract

We compare several models for estimating the default probabilities of Russian banks using national statistics from 1998 to 2011, and find that a binary logit regression with a quasi-panel data structure works best. The results indicate that there is a quadratic U-shaped relationship between a bank’s capital adequacy ratio and its probability of default. In addition, macroeconomic, institutional, and time factors significantly improve model accuracy. These results are useful for national financial regulatory authorities, as well as for risk-managers in commercial banks.

Keywords

Probability of default Banks Risk-management Default classification 

JEL Classification

G21 G24 G32 

Notes

Acknowledgements

The work is partially supported by the International Laboratory of Quantitative Finance, NRU HSE, RF government Grant, ag. 14.A12.31.0007; a Research project No. 05-0030 ≪Analysis of credit institutions insolvency≫, NRU HSE, RF.

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Copyright information

© Eurasia Business and Economics Society 2014

Authors and Affiliations

  1. 1.International Laboratory of Quantitative Finance, Higher School of EconomicsMoscowRussia

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