In this paper, we propose a new method based on genetic algorithms to solve the optimal default point of the KMV model. In our empirical study, we compare the GA-KMV model with the QR-KMV and KMV models. The results indicate that the percentage of correctness of the GA-KMV model is higher than those for the other two models. This is to say, the GA-KMV model has a better goodness of fit. We also...

AUTHOR Amnon Levy [email protected] Zhenya Hu This paper proposes a theoretical framework to account for systematic risk in recovery and to address the correlation between the firm’s underlying asset process and recovery. Under the proposed framework, the expected value in default under the risk neutral measure can be expressed as a linear function of the expected value under the physical mea...

Asset correlation is a critical driver in modeling portfolio credit risk. Despite its importance, there have been few studies on the empirical relationship between asset correlation and subsequently realized default correlation, and portfolio credit risk. This three three-way relationship is the focus of our study using U.S. public firm default data from 1981 to 2006. We find the magnitude of d...

This paper proposes a theoretical framework to account for systematic risk in recovery and to address the correlation between the firm’s underlying asset process and recovery. Under the proposed framework, the expected value in default under the risk neutral measure can be expressed as a linear function of the expected value under the physical measure. This allows for a simple mapping between e...

Title of Document: THE INFLUENCE OF NATIONAL CULTURE ON BUYER-SUPPLIER TRUST AND COMMITMENT Matthew Morris, Doctor of Philosophy, 2005 Directed By: Professor Thomas M. Corsi Logistics, Business and Public Policy Morgan and Hunt’s (1994) Key Mediating Variable (KMV) Model has been demonstrated to be a useful means of exploring relationships between organizations. The model includes such key rela...

Moody’s KMV method is a popular commercial implementation of the structural credit risk model pioneered by Merton (1974). It is an algorithm for estimating the unobserved asset value and the unknown parameters required for implementing such a model. This estimation method has found its way to the recent academic literature, but it has not yet been formally analyzed to assess its statistical pro...

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 proportion...

We discuss structuralmodels based onMerton’s framework. First, we observe that the classical assumptions of theMertonmodel are generally rejected. Secondly, we implement a structural credit riskmodel based on stable non-Gaussian processes as a representative of subordinated models in order to overcome some drawbacks of the Merton one. Finally, following the KMV-Merton estimation methodology, we...

until now, different models are presented to predict the status of customer’s credit risk and possibility of bankruptcy. it seems necessarry to deploy a model that is not only based on historical data but also uses market data as index of current situation of customers and even their expectations about future status. the purpose of this article is using kmv model to predict bankruptcy of legal ...

Quantitative rating systems are increasingly being used for the purposes of capital allocation and pricing credits. For these purposes, it is important to validate the accuracy of the probability of default (PD) estimates generated by the rating system and not merely focus on evaluating the discriminatory power of the system. The validation of the accuracy of the PD quantification has been a ch...