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A simple empirical model of equity-implied probabilities of default

Altman, Edward; Fargher, Neil; Kalotay, Egon

Description

Practitioners and academics have exploited the theoretical restrictions developed in Merton [1974] to predict distress based on the risk-neutral probability of default inferred from equity prices. Recent empirical studies such as Hillegeist, Keating, Cram, and Lundstedt [2004], and Bharath and Shumway [2008] have advocated the value of the approach relative to widely used alternatives.

CollectionsANU Research Publications
Date published: 2011
Type: Journal article
URI: http://hdl.handle.net/1885/65706
Source: Journal of Fixed Income
DOI: 10.3905/jfi.2011.20.3.071

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