How Good Is Merton Model at Assessing Credit Risk? Evidence from India

ISBN-13: 9783639326345 / Angielski / Miękka / 2011 / 56 str.

Alok Mishra

Opis

This book models the default probabilities and credit spreads for select Indian firms in the Black-Scholes-Merton framework.In particular,it shows that the objective (or real) probability estimates are higher than the risk-neutral estimates over the sample period. However, the probability measure is found to be robust to the default trigger point. The model output also compares favorably with the default rate reported by CRISILs Average 1-year rating transitions as well as the Altman Z-score measure. However it does not generate spreads as high as those observed in the corporate bond market. Perhaps not surprisingly, this is consistent with the received literature on credit spreads. This book is meant for Credit Analysts and Officers of the Credit Risk Management Department of banks and financial institutions who are concerned with designing and developing internal credit rating models, pricing models and credit portfolio models as well as students of Finanace and those teaching Risk Management.

O autorze

Dr. Alok Kumar Mishra is Assistant Professor of Economics at University of Hyderabad.He receieved his M.A., MPhil., and PhD. from University of Hyderabad.He has worked with Bank of New York Mellon as an Assistant Vice President CDO Analytics, Evaluserve.com Pvt. Ltd.as a Manager, and National Institute of Bank Management Pune as a Research Officer.