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KMV Credit Risk Model - Probability of Default - Default Risk

version 1.1 (8.25 KB) by

Calculate probability of default based on Moody’s KMV. firms equity follows European call optition



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KMV-Merton model Probability of Default represented by Jin-Chuan Duan, Genevi`eve Gauthier and Jean-Guy Simonato (2005).

This code calculates the probability of default based on Moody’s KMV where firms equity follows a geometric Brownian motion presented by Merton and the probability of default is calculated bas on European call option of the firms market value. Newton-Raphson method is used to calculate the equity value provided the volatility of the equity.

Comments and Ratings (1)



No updates, just added few comments to explain lines in the code.

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