This document explains and demonstrates one of the most popular models which determine company's default probability. This model is based on the structural approach, it is KMV model. KMV model is also known as Credit Monitor Model. It was created by Moody's Corporation. KMV model is based on the Merton Optional Concept where credit risk is controlled by dynamic value of company's assets. KMV model is best used for publicly traded companies whose the value of assets is determined by market. The main aim of KMV model is predict the expected default frequency, therefore default probability for individual debtors. This probability is based on the company's capital structure, on the market value of company's assets and their volatility. In the theoretical part this document explains the process of using KMV model. In the practical part is KMV model used on the model example.

Original languageEnglish
Title of host publication5TH INTERNATIONAL CONFERENCE ON APPLIED SOCIAL SCIENCE (ICASS 2015), PT 2
PublisherINFORMATION ENGINEERING RESEARCH INSTITUTE PRESS
Pages411-416
ISBN (Print)978-1-61275-072-9
DOIs
StatePublished - 2015
Event5th International Conference on Applied Social Science (ICASS 2015) - Limassol, Cyprus
Duration: 4 Oct 20155 Oct 2015

Publication series

NameAdvances in Education Research
PublisherINFORMATION ENGINEERING RESEARCH INST, USA
Volume81
ISSN (Print)2160-1070

Conference

Conference5th International Conference on Applied Social Science (ICASS 2015)
Country/TerritoryCyprus
CityLimassol
Period4/10/155/10/15

    Research areas

  • KMV model, Default probability, Credit risk, CREDIT RISK MODELS, VALUATION

ID: 39055264