In this paper we succinctly outline the modeling approach of Moody's for private firm default prediction. The processes of transforming ratios, weighting the transformations, and mapping to a default probability are examined. Accounting ratios in the US, Canada, and Australia are compared and...

Department: Economics.

This paper presents a method and testing of a corporate nonfinancial default model. Unique among models, it uses agency ratings as as input within the model, as well as financial statement and market information (e.g., Merton model). The default problem is defined as having a flat maximum,...

This paper argues that in general risk is not empirically correlated with returns in any obvious way. This puzzle is explained as the implication of a utility function in which if people care only about relative wealth, risk is a deviation from what everyone else is doing, and therefore becomes...