Structural Models of Default: Lessons from Firm-Level Data
10 Pages Posted: 28 May 2012 Last revised: 29 Sep 2013
Date Written: September 1, 2005
Structural credit risk models account for the average level of default rates within rating categories only when calibrated on a firm by firm basis. Nevertheless, firm-specific information matters little when one is interested in forecasting the path of default rates over time. This is because economic factors common to all firms strongly influence the evolution of default predictions.
JEL Classification: C520, G100, G300
Suggested Citation: Suggested Citation