Different Algorithms to Assess the Validity of the Merton Model

• Main Authors: Bo-Yuan Cai, 蔡博元
• Other Authors: Xiu-Yun Zhang
• Format: Others
• Language: zh-TW
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/80049428815042081513

碩士 === 真理大學 === 財經研究所 === 99 === 　　Past literature on the Merton model, less for the Merton model using different algorithms to assess the effectiveness of the model, and use different algorithms to estimate the unknown parameters in the model the company's assets and volatility, the accuracy of the model will have a certain extent. We use two methods of calculation in the literature for the past recognized and used by most scholars, and forecast the default probability for the next year of the firms from 2004 to 2009 in Taiwan. 　　We also use the default probability with the expected return on the firm’s asset that is different from risk-neutral default probability, as another risk indicator. For estimate the expected return on the firm’s asset, we calculate the annualized return on average assets, as alternative variables into the default probability formula by two algorithms. Were not distinguished in the distinction between annual and annual, verify the effectiveness of different algorithms on the Merton model, and verify that using the default probability with the expected return on the firm’s asset whether it has improved the accuracy of the model. 　　The results showed no distinction in the year, using the first algorithm to calculate the accuracy of the risk-neutral default probability is higher. When using the default probability with the expected return on the firm’s asset, both in the distinction the year or does not distinguish the year, the accuracy has improved under the two algorithms.