Calibrating a barrier model a barrier model describes the

Reference no: EM13382051

Calibrating a Barrier Model

A barrier model describes the event of default as the first time the market value of the firm falls below a critical value. For special cases a closed form solution exists. In general a simulation approach is used.

There are a number of issues that must be settled before running a simulation.

Part (A)

How do you determine the value of the firm, A(t0) ?

Part (B)

How do you determine the volatility of the describing the change in firm value, σ?

Part (C)

How do you determine the level of the barrier?

Reference no: EM13382051

Questions Cloud

Middot how does the balanced scorecard methodology need to : middot how does the balanced scorecard methodology need to be adjusted for non-profits and ngos? what are some examples

The annual inflation rate measured by the consumer price : the annual inflation rate measured by the consumer price index cpi was forecast to be 3.3. how could a t-bill have had

Question 1show that the cash flows from the following two : question 1show that the cash flows from the following two investments would be identical.i. 60 units of bond 1 1060

Olga is the proprietor of a small business in 2012 the : olga is the proprietor of a small business. in 2012 the business income before consideration of any cost recovery or

Calibrating a barrier model a barrier model describes the : calibrating a barrier model a barrier model describes the event of default as the first time the market value of the

Questionconsider a firm that only has one type of debt the : questionconsider a firm that only has one type of debt. the face value of the debt is f. the market value of the firms

Questionconsider a firm that has issued zero coupon debt it : questionconsider a firm that has issued zero coupon debt. it only has one type of debt outstanding. the face value of

1if you deposit 15000 today and earn 8 annual interest how : 1if you deposit 15000 today and earn 8 annual interest how much will you have in 9 years?2tiffany will receive a

Assume you have 1 million now and you have just retired : assume you have 1 million now and you have just retired from your job. you expect to live for 20 years and you want to

User Account

All Pages