What is CME Group Probability of Financial Distress (%)?
Probability of Financial Distress (%) measures the probability that a company will go bankrupt in the upcoming year given its current financial position. A higher ratio indicates a larger probability of bankruptcy for the company, while a lower ratio indicates a healthier fundamental. As of today, CME Group's Probability of Financial Distress (%) is 0.04%.
Like the Altman Z-Score, the PFD measures a company's bankruptcy risk. However, the main drawback of the Z-score is it does not apply to banks and insurance companies. According to Investopedia, the concept of "working capital" does not apply to banks and insurance companies, as financial institutions do not have typical current assets or current liabilities like inventories or accounts payable.
Competitive Comparison of CME Group's Probability of Financial Distress (%)
For the Financial Data & Stock Exchanges subindustry, CME Group's Probability of Financial Distress (%), along with its competitors' market caps and Probability of Financial Distress (%) data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
CME Group's Probability of Financial Distress (%) Distribution in the Capital Markets Industry
For the Capital Markets industry and Financial Services sector, CME Group's Probability of Financial Distress (%) distribution charts can be found below:
* The bar in red indicates where CME Group's Probability of Financial Distress (%) falls into.
CME Group Probability of Financial Distress (%) Calculation
Probability of Financial Distress (%) (PFD) was developed by John Campbell, Jens Hilscher and Jan Szilagyi in their Search of Distress Risk. It measures the probability that a company will go bankrupt within the next 12 months given its current financial position.
The Probability of Financial Distress (%) was obtained by a logit probability model based on eight explanatory variables. The logit formula to compute the probability of financial distress (LPFD) is given below:
| LPFD | = | -20.12 * NIMTAAVG | + | 1.60 * TLMTA | - | 7.88 * EXRETAVG | + | 1.55 * SIGMA | - | 0.005 * RSIZE | - | 2.27 * CASHMTA | + | 0.070 * MB | - | 0.09 * PRICE | - | 8.87 |
| = | -7.74 |
The Probability of Financial Distress (%) (PFD) was then obtianed by:
| PFD | = | 1 | / | (1 + e^(-LPFD)) | * | 100% |
| = | 0.04% |
The eight explanatory variables are:
1. NIMTAAVG = Net Income to Market Total Assets
*Note that for companies reported quarterly, geometrically declining weighted quarterly Net Income data in latest four quarters are used.
2. TLMTA = Total liabilities to Market Total Assets
3. CASHMTA = Cash to Market Total Assets
For non-financial companies, CASHMTA is measured as:
4. EXRETAVG = Excess Return compared to the S&P 500
EXRETAVG is the weighted excess return compared to the S&P 500 in past 12 month. Geometrically declining weights are imposed on the monthly excess return to reflect lagged information. The weight is halved each quarter.
5. SIGMA = Standard Deviation of Daily Returns
For sigma, we use the annualized standard deviation of a company's returns over the past 92 days (or 63 trading days).
6. RSIZE = Relative Size
| RSIZE | = | log (Market Cap | / | Total Market Cap of S&P 500 companies) |
7. MB = Market to Adjusted Book Equity Ratio
8. PRICE
PRICE is measured as the log of the stock price, capped at log(15).
CME Group (CME Group) Business Description
Traded in Other Exchanges
Address
20 South Wacker Drive, Chicago, IL, USA, 60606
Based in Chicago, CME Group operates exchanges giving investors, suppliers, and businesses the ability to trade futures and derivatives based on interest rates, equity indexes, foreign currencies, energy, metals, and commodities. The CME was founded in 1898 and in 2002 completed its initial public offering. Since then, CME Group has consolidated parts of the industry by merging with crosstown rival, CBOT Holdings in 2007 before acquiring Nymex Holdings in 2008 and NEX in 2018. In addition, the company has a 27% stake in S&P Dow Jones Indices, making the Chicago Mercantile Exchange the exclusive venue to trade and clear S&P futures contracts. Through CME's acquisition of NEX in 2018 it has also expanded into cash foreign exchange, fixed income trading, and collateral optimization.
Executives
| William R Shepard |
director |
20 S. WACKER DR, CHICAGO IL 60606 |
| Bryan T Durkin |
officer: MD & COO |
20 S. WACKER DRIVE, CHICAGO IL 60606 |
| Derek Sammann |
officer: Managing Dir Financial Product |
20 S. WACKER DRIVE, CHICAGO IL 60606 |
| Dennis Suskind |
director |
ONE NORTH END AVENUE, WORLD FINANCIAL CENTER, NEW YORK NY 10282 |
| Suzanne Sprague |
officer: Sr MD Global Head of Clearing |
20 SOUTH WACKER DRIVE, 18S, CHICAGO IL 60606 |
| Timothy Francis Mccourt |
officer: Sr MD Global Head Equity & FX |
20 S WACKER DRIVE, CHICAGO IL 60606 |
| Elizabeth A Cook |
director |
20 S. WACKER DRIVE, CHICAGO IL 60606 |
| Martin J Gepsman |
director |
20 S. WACKER DR, CHICAGO IL 60606 |
| Terrence A Duffy |
director |
20 S. WACKER DR, CHICAGO IL 60606 |
| Julie Holzrichter |
officer: MD Operations |
20 S. WACKER DRIVE, CHICAGO IL 60606 |
| Timothy S. Bitsberger |
director |
20 S. WACKER DRIVE, CHICAGO IL 60606 |
| Julie Winkler |
officer: Chief Commercial Officer |
20 S. WACKER DR., CHICAGO IL 60606 |
| Daniel R Glickman |
director |
20 S. WACKER DR, CHICAGO IL 60606 |
| Hilda Harris Piell |
officer: MD, Organizational Development |
20 S. WACKER DRIVE, CHICAGO IL 60606 |
| Sunil Cutinho |
officer: President, CME Clearing |
20 S. WACKER DR., CHICAGO IL 60606 |
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