Beyond Merton: Multi-Dimensional Balance Sheet in Default Modeling

Balance Sheet

Validation of the Merton Distance to the Default Model

Bharath and Shumway (2008) provide evidence that shows that it is the functional form of Merton’s (1974) distance to default (DD) model that makes it useful and important for predicting defaults. In this paper, we investigate whether the default predictability of the Merton DD model would be affected by taking investors’ ambiguity aversion into consideration. The Cox proportional hazard model i...

Default Probability Prediction with Static Merton-d-vine Copula Model

We apply standard Merton and enhanced Merton-D-Vine copula model for the measurement of credit risk on the basis of accounting and stock market data for 4 companies from Prague Stock Exchange, in the midterm horizon of 4 years. Basic Merton structural credit model is based on assumption that firm equity is European option on company assets. Consequently enhanced Merton model take in account mar...

Predicting default among UK companies: a Merton approach

Recent research at the Bank has been aimed at quantifying the risk of default by individual companies. There are a number of separate ways in which this can be assessed. First, by informal judgement based on company visits and accounting information. Second, by formal quantitative analysis of accounting information and other disclosures. Third, by formal quantitative analysis of market-based in...

TiC2: a new two-dimensional sheet beyond MXenes.

MXenes are attracting attention due to their rich chemistry and intriguing properties. Here a new type of metal-carbon-based sheet composed of transition metal centers and C2 dimers rather than individual C atom is designed. Taking the Ti system as a test case, density functional theory calculations combined with a thermodynamic analysis uncover the thermal and dynamic stability of the sheet, a...