Modeling Default Risk Modeling
نویسندگان
چکیده
Default risk is the uncertainty surrounding a firm's ability to service its debts and obligations. Prior to default, there is no way to discriminate unambiguously between firms that will default and those that won't. At best we can only make probabilistic assessments of the likelihood of default. As a result, firms generally pay a spread over the default-free rate of interest that is proportional to their default probability to compensate lenders for this uncertainty. AUTHORS Peter Crosbie Jeff Bohn 415-352-1279 [email protected] CONTACTS Ahmet Kocagil 212-553-3889 [email protected] © 2003 Moody’s KMV Company. All rights reserved. Credit Monitor®, EDFCalc®, Private Firm Model®, KMV®, CreditEdge, Portfolio Manager, Portfolio Preprocessor, GCorr, DealAnalyzer, CreditMark, the KMV logo, Moody's RiskCalc, Moody's Financial Analyst, Moody's Risk Advisor, LossCalc, Expected Default Frequency, and EDF are trademarks of MIS Quality Management Corp. Published by: Moody’s KMV Company To Learn More Please contact your Moody’s KMV client representative, visit us online at www.moodyskmv.com, contact Moody’s KMV via e-mail at [email protected], or call us at: NORTH AND SOUTH AMERICA, NEW ZEALAND AND AUSTRALIA, CALL: 1 866 321 MKMV (6568) or 415 296 9669 EUROPE, THE MIDDLE EAST, AFRICA AND INDIA, CALL: 44 20 7778 7400 FROM ASIA CALL: 813 3218 1160
منابع مشابه
Credit Risk Modeling with Gaussian Random Fields
The literature on credit risk consists of different approaches in modeling the behavior of defaultable bonds. The structural approach is based on the evolution of the firm value to determine default and recovery. In contrast, the more recently developed intensity-based models specify the default time exogenously. In this approach the defaultable yield curve results from the risk-free yield curv...
متن کاملCredit risk modeling with affine processes q
This article combines an orientation to credit risk modeling with an introduction to affine Markov processes, which are particularly useful for financial modeling. We emphasize corporate credit risk and the pricing of credit derivatives. Applications of affine processes that are mentioned include survival analysis, dynamic term-structure models, and option pricing with stochastic volatility and...
متن کاملProbabilistic Aspects of Default Risk Modeling
Various probabilistic techniques, which are used in the modeling of derivative securities (in particular, zero-coupon bonds) that are subject to default risk are presented in a systematic way. A large class of existing models of the defaultable term structure is covered by our analysis, in addition, some new ideas are presented.
متن کاملAn Application of Genetic Network Programming Model for Pricing of Basket Default Swaps (BDS)
The credit derivatives market has experienced remarkable growth over the past decade. As such, there is a growing interest in tools for pricing of the most prominent credit derivative, the credit default swap (CDS). In this paper, we propose a heuristic algorithm for pricing of basket default swaps (BDS). For this purpose, genetic network programming (GNP), which is one of the recent evolutiona...
متن کاملModeling and estimating dependent loss given default
We propose a portfolio credit risk model with dependent loss given default (LGD) which allows for a reasonable economic interpretation and can easily be applied to real data. We build up a precise mathematical framework and stress some general important issues when modeling dependent LGD. Finally, we calibrate the model based on American bond data from 1982 to 2001 and compare the results with ...
متن کاملDefault Prediction of Alternative Structural Credit Risk Models and Implications of Default Boundaries
While most of the empirical studies of structural credit risk models try to test the performance of structural models in bond and credit derivatives pricing, little results are provided for default prediction. Therefore, in this study, we empirically compare four structural credit risk models – for their default prediction capabilities. Our empirical results indicate that exogenous default boun...
متن کامل