A comparison of estimated default probabilities: Merton model vs. stable Paretian model

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F61989100%3A27510%2F13%3A86088606" target="_blank" >RIV/61989100:27510/13:86088606 - isvavai.cz</a>
Result on the web
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DOI - Digital Object Identifier
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Result language
angličtina
Original language name
A comparison of estimated default probabilities: Merton model vs. stable Paretian model
Original language description
This paper is devoted to an empirical comparison of probabilities of default obtained from two structural type credit risk models: the Merton model and the stable Paretian model. First, we prove on our data that log-normal distributional assumptions of the classical Merton model are generally rejected. Therefore, we propose a more general structural model based on stable non-Gaussian processes as a representative of subordinated models. In the application of the models we use Moody?s KMV methodology anda new extended KMV methodology respectively. Finally, our results suggest that default probabilities obtained from the classical Merton model are underestimated.
Czech name
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Czech description
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Project
Result was created during the realization of more than one project. More information in the Projects tab.
Continuities
P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Publication year
2013
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Article name in the collection
Financial Management of Firms and Financial Institutions : 9th international scientific conference : 9th - 10th September 2013, Ostrava, Czech Republic : proceedings. [Part 1-3]
ISBN
978-80-248-3172-5
ISSN
2336-162X
e-ISSN
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Number of pages
10
Pages from-to
217-226
Publisher name
VŠB-Technical University of Ostrava
Place of publication
Ostrava
Event location
Ostrava
Event date
Sep 9, 2013
Type of event by nationality
EUR - Evropská akce
UT code for WoS article
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