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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.

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1.1

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

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