This paper proposes a variant application of the Merton distance-to-default model by employing implied volatility and …%. Overall, our results establish the informational relevance of implied cost of capital and implied volatility in predicting …

financial markets, and volatility of exchange rates in the international context. This book can be used as a reference for …

We consider a stochastic volatility model of the mean-reverting type to describe the evolution of a firm's values … default probability. Our simulation results indicate that the stochastic volatility model tends to predict higher default … probabilities than the corresponding Merton model if a firm's credit quality is not too low. Otherwise the stochastic volatility …

We test whether a simple measure of corporate insolvency based on equity return volatility - and denoted as Distance to … Insolvency (DI) - delivers better predictions of corporate default than the widely-used Expected Default Frequency (EDF) measure …