Most empirical research of the path-dependent, exotic-option credit risk model focuses on developed markets. Taking Taiwan as an example, this study investigates the bankruptcy prediction performance of the path-dependent, barrier option model in the emerging market. We adopt Duan’s (1994)...

We investigate the performance of a default risk model based on the barrier option framework with maximum likelihood estimation. We provide empirical validation of the model by showing that implied default barriers are statistically significant for a sample of construction firms in Taiwan over...