The Credit Market Handbook: Advanced Modeling Issues

Contents

 

Introduction

Executive Chapter Summaries

 

CHAPTER 1Estimating Default Probabilities Implicit in Equity PricesTibor Janosi, Robert Jarrow, and Yildiray Yildirim

 

Introduction

The Model Structure

Description of the Data

Estimation of the State Variable Process Parameters

Equity Return Estimation

Analysis of the Time Series Properties of the Parameters

Analysis of Fama–French Four-Factor Model with No Default

Analysis of a Bubble Component (P/E ratio) in Stock Prices

Analysis of the Default Intensity

Relative Performance of the Equity Return Models

Comparison of Default Intensities Based on Debt versus Equity

Conclusions

Notes

References

Appendix

 

CHAPTER 2Predictions of Default Probabilities in Structural Models of DebtHayne E. Leland

 

Introduction

Recent Empirical Studies

Structural Models and Default Risk

The Default Boundary in Exogenous and Endogenous Cases

The Default Probability with Constant Default Barrier

Calibration of Models: The Base Case

Matching Empirical Default Frequencies with the L-T Model

Matching Empirical DPS with the L-S Model

The Moody's-KMV Approach

Some Preliminary Thoughts on the Relationship Between the KMV Approach and L-S/L-T

Conclusions

Acknowledgments

Postscript

Appendix

Notes

References

 

CHAPTER 3Survey of the Recent Literature: Recovery RiskSanjiv R. Das

 

Introduction

Empirical Attributes

Recovery Conventions

Recovery in Structural Models

Recovery in Reduced-Form Models

Measure Transformations

Summary and Speculation

References