Purpose – Estimation of default and asset correlation is crucial for banks to manage and measure portfolio credit risk. The purpose of this paper is to find empirical relationship between the default and asset correlation with default probability, to understand the effect of systematic risk....

Purpose – The purpose of this article is to discuss a Black-Scholes-Merton (BSM)-based market approach to quantify the default risk of publicly-listed individual companies. Design/methodology/approach – Using the contingent claim approach, a framework is presented to optimally use stock...

Purpose – The purpose of this paper is to develop a hybrid logistic model by using the inputs obtained from BSM equity-based option model described in the companion paper, “Mapping corporate drift towards default – Part 1: a market-based approach” that can more accurately predict...

Purpose – This paper aims at developing an early warning signal model for predicting corporate default in emerging market economy like India. At the same time, it also aims to present methods for directly estimating corporate probability of default (PD) using financial as well as non-financial...

Purpose – This paper is a first attempt to empirically calibrate the default and asset correlation for large companies in India and elaborate its implications for credit risk capital estimation for a bank. Design/methodology/approach – The authors estimate default probabilities and default...