Forte, Santiago; Lovreta, Lidija - In: Journal of Banking & Finance 36 (2012) 6, pp. 1639-1652
In this paper, we propose a Maximization–Maximization (MM) algorithm for the assessment of hidden parameters in structural credit risk models. Step M1 updates the value, volatility, and expected return on the firm’s assets by maximizing the log-likelihood function for the time series of...