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A note on the survival probability in CreditGrades

Kiesel, Rüdiger and Veraart, Luitgard A. M. (2008) A note on the survival probability in CreditGrades. Journal of Credit Risk, 4 (2). ISSN 1744-6619

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Abstract

This paper examines survival probability in the CreditGrades model. We find that the exact closed-form formula stated in Finger et al (2002) for the survival probability of a firm is incorrect. We correct the formula and compare the exact survival probability with the frequently used approximation. We find that there are circumstances in which these two formulas differ significantly. This is in particular the case if one considers highly leveraged companies such as banks.

Item Type: Article
Official URL: http://www.journalofcreditrisk.com/public/showPage...
Additional Information: © 2008 Incisive Media Investments Limited
Library of Congress subject classification: H Social Sciences > HF Commerce
H Social Sciences > HG Finance
Journal of Economic Literature Classification System: G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation
G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure
Sets: Departments > Mathematics
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 27 Jul 2011 13:54
URL: http://eprints.lse.ac.uk/37619/

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