The study addresses problems in measuring credit risk under the structure model, and then proposes a seemingly unrelated regression model (SUR) to predict farms’ ability in meeting their current and anticipated obligations in the next 12 months. The empirical model accounts for both the...

This paper examines the two-way linkages between credit risk measurement and the macroeconomy. It first discusses the issue of whether credit risk is low or high in economic booms. It then reviews how macroeconomic considerations are incorporated into credit risk models and the risk measurement...

As the debt ceiling episode unfolds, we highlight a sharp increase in activity across the U.S. credit default swaps (CDS) market and infer the likelihood of a U.S. default from these market prices. Beginning in January 2023, we document a significant increase in U.S. CDS trading activity and...

With the exception of holders of default-free instruments, a key risk run by investorsis credit risk. To meet the need of investors to hedge this risk, the market uses creditderivatives.The South African credit derivatives market is still in its infancy and only the verysimplistic instruments...

We consider a stochastic volatility model of the mean-reverting type to describe the evolution of a firm’s values instead of the classical approach by Merton with geometric Brownian motions. We develop an analytical expression for the default probability. Our simulation results indicate that...

Model uncertainty hampers consensus on the main determinants of corporate default. We employ Bayesian model averaging (BMA) techniques in order to shed light on this issue. Empirical findings suggest that the most robust determinants of corporate default are firm-specific variables such as the...

This study estimates default probabilities of 124 emerging countries from 1981 to 2002 as a function of a set of macroeconomic and political variables. The estimated probabilities are then compared with the default rates implied by sovereign credit ratings of three major international credit...

Equity returns and firm's default probability are strictly interrelated financial measures capturing the credit risk profile of a firm. Following the idea proposed in [20] we use high-frequency equity prices in order to estimate the volatility risk component of a firm within Merton [17]...