A simple empirical model of equity-implied probabilities of default

Edward Altman*, Neil Fargher, Egon Kalotay

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

8 Citations (Scopus)

Abstract

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.

Original languageEnglish
Pages (from-to)71-85
Number of pages15
JournalJournal of Fixed Income
Volume20
Issue number3
DOIs
Publication statusPublished - Dec 2011

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