Quantitative Structural Models to Assess Credit Risk on Individuals

Default Probabilities quantitatively measures the credit risk that a borrower will be unable or unwilling to repay its debt. An accurate model estimate, as function of time, these default probabilities is crucial importance in derivatives market. In this work, we adapt Merton’s [1] original works on risk, consumption and portfolio rules an individual wealth scenario, apply it compute probabilities. Using our model, also time depending intensities, recovery rates, hazard rate premiums. Hence, straight-forward application, can used novel way measure individuals.