The Merton model for assessing the structural credit risk of a company models the equity of a company as a call option on its assets and the liability is a strike price. For more information on the Merton model, see Default Probability by Using the Merton Model for Structural Credit Risk.
mertonmodel | Estimates probability of default using Merton model |
mertonByTimeSeries | Estimate default probability using time-series version of Merton model |
Comparison of the Merton Model Single-Point Approach to the Time-Series Approach
This example shows how to compare the Merton model approach, where equity volatility is provided, to the time series approach.
Default Probability by Using the Merton Model for Structural Credit Risk
The Merton model is structural because it gives a relationship between the default risk and the capital structure of the firm.