Merton (1974) suggested a structural model for default prediction which allows using timely information from the equity market. The literature describes several specifications to the application of the model, including methods presumably used by practitioners. However, recent studies demonstrate...

In 1973, Fisher Black, Myron Scholes and separately Robert Merton derived the Black-Scholes-Merton (BSM) model, which was rewarded the Nobel Prize in 1997. Despite its limitations, the model has survived until today as the dominant pricing model for standard and exotic European style options....

The objective of this paper is to quantify the default probabilities of the top 42 nonfinancial firms listed on the Johannesburg Stock Exchange. This paper follows the same methodology as outlined in the Moody’s KMV white papers in implementing the Merton (1974) model. The model of default...

Housing and pension wealth are shown to be important determinants of personal sector consumption and retirement behaviour in the UK. Housing and state pension wealth have a positive effect on consumption, while private pension wealth promotes greater savings. Greater private defined benefit...

Banks that choose credit rating models for capital calculations depending solely on an accuracy criterion may overlook the effect of their selection on the rating migration that could lead to higher capital requirements. Although most of the recognised factors affecting migration such as...