The paper develops an early-warning model for predicting vulnerabilities leading to distress in European banks using both bank and country-level data. As outright bank failures have been rare in Europe, the paper introduces a novel dataset that complements bankruptcies and defaults with state...

In this chapter we discuss model selection and predictive accuracy tests in the context of parameter and model uncertainty under recursive and rolling estimation schemes. We begin by summarizing some recent theoretical findings, with particular emphasis on the construction of valid bootstrap...