OTC market is a crucial segment of banks' activities, particularly at the macroeconomic level.As well as the cash market, it is a complex multi-factor structure in which the risks of insolvency is quite large.In the simulation and study of available correlations of defaults with a nominal value of banks' assets in the international practice in the assessment of the probability of default commonly used method of moments assets portfolio, which is known as asset-value approach.Also it can be used and the method of maximum likelihood (the maximum likelihood approach).
OTC market and its characteristics suggest that to determine the annual probability of default information is needed as follows:
1. The number of commercial banks at the beginning of each calendar year for the required period;
2. The number of commercial banks, which are characterized by the fact of default, namely on the basis of the subsequent liquidation of such decisions on the liquidation of a commercial bank to suspend or revoke a license in connection with the subsequent liquidation, as well as filing a claim in court for recognition of the bank's bankruptcy.
Calculating the rate of default of commercial banks at time t equal to the number of defaults, divided by the maximum number of defaults, and is defined by the formula:
(Do {Dt-1)) / 2 _ Do (Do-l) P (Not(Nt-1)) / 2 "Not (Nt-1) P. 106L,
where: p2av - annual probability of default of any single commercial bank system. At the same time we eliminate the influence of internal and external factors of the functioning of the system of commercial banks and take into accountonly the impact factor, which reflects the number of banks, which are characterized by the fact of default; Dt- number of elements of the system by which the status of default for the selected time period t; Nt - the number of operating banks in the selected time period t; t - time interval equal to one calendar year.
annual probability of default values should be compared with the selected indicators of the macroeconomic environment (that requires the OTC market or corporate securities market) to establish the existence of linear regression dependence.The presence of such a relationship will prove the hypothesis of a real link between the closure of the commercial banks and the changes taking place in such an environment, and subsequently, based on the constructed linear regression equation, you can also predict changes of selected macroeconomic indicators, hypothetically changing the amount of liquidated commercial banks.
degree of correlation between the annual probability of default and macroeconomic environment is characterized by the correlation coefficient, if it is in the range equal to or from -1 to +1, then we can speak of a linear regression relationship between the two rows of discrete data.
macroeconomic environment of the state can be characterized by countless indicators, but at present we are interested in only those linear regression dependence on the annual probability of default, we can prove to the purity of the experiment.It should be noted that most of the economic indicators may have a correlation relationship with an annual probability of default, however, the OTC market is designed in such a way that this relationship is dysfunctional, and so its presence can be subjective.
This analysis suggests that between indicators such as the annual probability of default and the macroeconomic environment, there is clearly expressed the causal link.Thus, the closure of commercial banks due to the decline in foreign exchange reserves, placed by credit institutions in other countries, which negatively affects the investment position and leads to an increase in the size of the net domestic credit to government.
