Utilization of market data in default risk measurement and sructural models, an application in the Turkish banking sector

Default risk measurement in the banking sector has become a significant topic in Turkey, especially after the financial crises in 2000 and 2001. In the structural approach to default prediction, stock market based market data is utilised. In this research, it is investigated whether the consideration of market data as well as accounting data has an information value. When a model comprising only accounting data and a model comprising both accounting and market data are compared, the inclusion of market data seems to exhibit -with 90 % confidence interval- information value for default prediction of the Turkish Banking System. It is expected that default risks of the banks are diminished as a result of the precautions applied after the crises of 2000 and 2001. When the default probabilities are computed by the Structural Models, there seems to be a significant difference ?with 95 % confidence interval-between before and after crises periods.