Australian mining industry: Credit and market tail risk during a crisis period
Document Type
Journal Article
Publisher
Institute of Research and Journals
Faculty
Faculty of Business and Law
School
School of Business
RAS ID
20121
Abstract
Industry risk is important to equities investors in determining portfolio mix. It is also important to lenders in managing credit portfolio risk. This article focuses on the mining industry in Australia, that country’s largest industry by exports. The study concentrates on extreme credit and market risk, to determine the riskiness of the mining industry relative to the broader market, with a focus on the Global Financial Crisis (GFC) period and the use tail risk metrics. These include Conditional Value at Risk (CVaR) for measuring market risk and Conditional Distance to Default (CDD) for measuring credit risk. Based on these metrics, the study finds market risk for mining shares to be higher than the broader market, but that the gap narrows during the crisis. From a credit perspective, despite higher volatility experienced by the mining industry, the default risk is lower than the broader market, due to the greater distance between mining entities’ asset and debt values.
Access Rights
free_to_read
Comments
Powell. R. (2015). Australian mining industry: Credit and market tail risk during a crisis period. International Journal of Management and Applied Science, 1(8), pp. 159-163. Available here.