Need to know We introduce a Stochastic Recovery Merton model where we include correlation between probability of default and loss given default to the classical Merton model by adding a recovery risk ...

We examine the accuracy and contribution of the Merton distance to default (DD) model, which is based on Merton's (1974) bond pricing model. We compare the model to a "naive" alternative, which uses ...

This paper addresses the building of obligor level hazard rate corporate probability-of-default (“ PD ”) models for stress testing, departing from the predominant practice in wholesale credit modeling ...

R. Merton published a seminal paper [1] that laid the foundation for the development of structural credit risk models.

Leading researchers in finance have been near-unanimous in their conclusion that modern "reduced form" default probabilities are more accurate than the 1974 Merton model.

This paper investigates the information in corporate credit ratings. If ratings are to be informative indicators of credit risk, they must reflect what a risk-averse investor cares about: both raw ...