Expected Default Probabilities in Structural Models: Empirical Evidence
AbstractWe apply a set of structural models (Black and Cox 1976; Collin-Dufresne and Goldstein 2001; Ericsson and Reneby 1998; Leland and Toft 1996; Longstaff and Schwartz 1995; Merton 1974) to estimate expected default probabilities (EDPs) for a sample of failed and non-failed UK real estate companies. Results are generally consistent with models’ predictions and estimates of EDPs for different models are closely clustered. The results of z-scores and synthetic ratings misclassify 33% of the total sample in contrast to 8% misclassification by structural models. Further analysis of EDPs based on logistic regressions suggests the observed misclassification of the companies by structural models is due to special company management and/or regulatory circumstances rather than limitations of these models. Copyright Springer Science+Business Media, LLC 2007
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Bibliographic InfoArticle provided by Springer in its journal The Journal of Real Estate Finance and Economics.
Volume (Year): 34 (2007)
Issue (Month): 1 (January)
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Web page: http://www.springerlink.com/link.asp?id=102945
Expected default probabilities; Structural models; C30; G13; G33;
Find related papers by JEL classification:
- C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
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