Measuring and managing market, credit and Op risk [57]

Go to: Summary | Previous | Next   
Bullet points include: Moody’s-KMV model assumes that firms default when their asset value falls below weighted sum of long- and short-term debt But implementing full Monte Carlo analysis with this assumption seems to generate poor results So adopt this assumption in volatility estimation but then rescale distance from initial kt to trigger before performing Monte Carlo Rescaling uses non-linear transformation, based on historical default data

Contents | Prev | Next | ERM Lecture Series

Desktop view | Switch to Mobile