Predicting Default Risk Using Merton’s Model – a Case Study…

This case study presents a simple spreadsheet-based version of Merton’s credit risk model (i.e., normally as KMV model) to predict default risk using a Chinese utility stock data (Quote: 600021 Shanghai Electric Power Limited) from 2008 to 2009. Due to the limitation of data availability in developing country such as China, the option-based modeling approach is to be the most straightforward approach to evaluate the default risk of public company. Key Word: Merton’s Model, Credit Risk, Probability… More information...

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