Credit analysis, bond rating forecasting, and default probability estimation

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

In this chapter, we will discuss how to use discriminant analysis to do credit analysis and calculate financial z-score, then we will use both discriminant analysis and factor analysis to forecast bond rating by using financial ratio information. In addition, we will discuss Ohlson’s model and the KMV-Merton model for default probability estimation. Finally, we will cite some empirical results about default probability estimation and compare the results of two different probability estimation models.

Original languageEnglish (US)
Title of host publicationHandbook of Financial Econometrics, Mathematics, Statistics, and Machine Learning (In 4 Volumes)
PublisherWorld Scientific Publishing Co.
Pages2635-2671
Number of pages37
ISBN (Electronic)9789811202391
ISBN (Print)9789811202384
DOIs
StatePublished - Jan 1 2020

All Science Journal Classification (ASJC) codes

  • Economics, Econometrics and Finance(all)
  • Business, Management and Accounting(all)

Keywords

  • Credit analysis
  • Default probability
  • Discriminant analysis
  • Factor analysis
  • Factor loading
  • Factor score
  • Financial z-score
  • Hazard model
  • Idiosyncratic standard deviation
  • Kmv-merton model
  • Logit model
  • Multivariate discriminant analysis (MDA)

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