Riskcalc for Private Companies: Moody's Default Model

88 Pages Posted: 1 Nov 2000

See all articles by Eric G. Falkenstein

Eric G. Falkenstein

Pine River Capital Management

Andrew Boral

Moody's Investors Service

Lea V. Carty

Moody's Investors Service


This paper explains and documents many issues related to default prediction based on financial statements. The underlying methodology is completely revealed and addresses many important practicalities in empirical default estimation. Test statistics are also provided on various models using our proprietary, and unprecedently large database of US and Canadian firms. We outline the current context of these tools in the banking industry, and describe several popular modeling choices. A chapter on variable selection illustrates the dominance of various financial statements (e.g., liabilities/assets vs. liabilities/tangible assets). This approach represents how one of the best-known credit companies is approaching quantitative models at the outset of an international effort to provide credit benchmarks for middle market companies.

Keywords: Default, private firm, default model, default prediction

JEL Classification: G33, M41

Suggested Citation

Falkenstein, Eric G. and Boral, Andrew and Carty, Lea, Riskcalc for Private Companies: Moody's Default Model. As published in Global Credit Research, May 2000. Available at SSRN: https://ssrn.com/abstract=236011 or http://dx.doi.org/10.2139/ssrn.236011

Eric G. Falkenstein (Contact Author)

Pine River Capital Management ( email )

601 Calson Parkway, Suite 330
Minnetonka, MN 55347
United States
6123091588 (Phone)
6123091588 (Fax)

Andrew Boral

Moody's Investors Service ( email )

99 Church Street
New York, NY 10007
United States

Lea Carty

Moody's Investors Service ( email )

99 Church Street
New York, NY 10007
United States

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics

Under construction: SSRN citations while be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information