Empirical studies of structural credit risk models and the application in default prediction: Review and new evidence

Han Hsing Lee, Ren Raw Chen, Cheng Few Lee

研究成果: 圖書/報告稿件的類型章節同行評審

摘要

This chapter first reviews empirical evidence and estimation methods of structural credit risk models. Next, an empirical investigation of the performance of default prediction under the down-and-out barrier option framework is provided. In the literature review, a brief overview of the structural credit risk models is provided. Empirical investigations in extant literature papers are described in some detail, and their results are summarized in terms of subject and estimation method adopted in each paper. Current estimation methods and their drawbacks are discussed in detail. In our empirical investigation, we adopt the Maximum Likelihood Estimation method proposed by Duan (1994). This method has been shown by Ericsson and Reneby (2005) through simulation experiments to be superior to the volatility restriction approach commonly adopted in the literature. Our empirical results surprisingly show that the simple Merton model outperforms the Brockman and Turtle (2003) model in default prediction. The inferior performance of the Brockman and Turtle model may be the result of its unreasonable assumption of the flat barrier.

原文英語
主出版物標題Handbook of Financial Econometrics, Mathematics, Statistics, and Machine Learning (In 4 Volumes)
發行者World Scientific Publishing Co.
頁面1845-1901
頁數57
ISBN(電子)9789811202391
ISBN(列印)9789811202384
DOIs
出版狀態已出版 - 01 01 2020
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© 2021 by World Scientific Publishing Co. Pte. Ltd.

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