The Impact of Persistence in Volatility over the Probability of Default

We evaluate the impact of persistence in volatility over the probability of default in Merton’s credit risk model. Our main conclusion is that a high degree of persistence, as it is observed in equity returns, implies a lower probability of default for those cases where firms possess a high level of leverage.

MoreLess

Year of publication:	2013-06
Authors:	Alfaro, Rodrigo ; Golberger, Natán
Institutions:	Banco Central de Chile

More details

Extent:	application/pdf
Series:	Working Papers Central Bank of Chile.
Type of publication:	Book / Working Paper
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010736451