Power and Level Validation of Moody’s Kmv Edf Credit Measures in North America, Europe, and Asia
نویسندگان
چکیده
In this paper, we validate the performance of Moody’s KMV EDF credit measures in its timeliness of default prediction, ability to discriminate good firms from bad firms, and accuracy of levels in three regions: North America, Europe, and Asia. We focus on the period 1996–2006 for most of our tests. Wherever possible, we compare the performance to that of other popular alternatives, such as agency ratings, Moody’s KMV RiskCalc EDF credit measures, Altman’s Z-Scores, and a simpler version of the Merton model. We find that EDF credit measures perform consistently well across different time horizons, and different subsamples based on firm size and credit quality. Our tests indicate that EDF credit measures provide a very useful measure of credit risk that can be applied throughout the world. AUTHORS
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