An Analysis of Default Probability in CreditGrades Model

• Main Authors: Chih-min Kuo, 郭智民
• Other Authors: Yi-ping Chang
• Format: Others
• Language: zh-TW
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/39727890614716613923

碩士 === 東吳大學 === 財務工程與精算數學系 === 99 === Since 2007 subprime mortgage crisis has been, events of default occur in many companies, so credit risk become an important topic. CreditGrades model is the credit risk model by Finger et al. (2002) proposed, and the purpose is to measure default probability of corporate, in CreditGrades model assumes that recovery rate follow the lognormal distribution, but this way may be make the recovery rate greater than 1. In this article, we will continue the structure of CreditGrades model, and propose the modified model assum that recovery rate follow the runcated lognormal distribution, it will guarantee that recovery rate can not greater than 1, it lead to that the modified model of CreditGrades model be more reasonable. This article also calculate the default probability of corporate under the modified model of CreditGrades model, and compare two models under the recovery rate in different parameters.