--%>

Why is structural approach to modelling risk of default born

Why is structural approach to modelling risk of default born?

E

Expert

Verified

The structural approach was born to modelling risk of default, when the option expired out of the money (that is assets had less value than the debt at maturity) so the firm would have to go bankrupt.

   Related Questions in Financial Management

  • Q : Inernational portfolio manangement 5.

    5. What are the factors responsible for the recent surge in international portfolio investment? plz explain in 20 marks

  • Q : Cross-list equity shares on more than

    Explain any benefits you can think of for any company to cross-list its equity shares on more than one national exchange?A MNC that has a product market presence or manufacturing facilities in many countries may cross-list its shares on the exch

  • Q : Major types of international bond

    In brief define each of the major types of international bond market instruments, noting their distinguishing characteristics.The major kind of international bond instruments & their distinguishing characteristics are as follows:

  • Q : Who measured risk as coherent in

    Who measured risk as coherent, in finance theory?

  • Q : Explain the programme of study of

    Explain the programme of study of finite differences.

  • Q : What kind of insurance organisations

    What kind of insurance organisations usually takes on the greater risks: a life insurance company or casualty insurance company and a property?

  • Q : Advantage of less equilibrium exchange

    Assume that the pound is pegged to gold at 6 pounds per ounce, while the franc is pegged to gold at 12 francs per ounce. Of course it implies that the equilibrium exchange rate ought be two francs per pound. If the current market exchange rate is 2.2 francs pe

  • Q : Is volatility constant Is volatility

    Is volatility constant?

  • Q : Explain merits and demerits of Mr

    Mr. Ross Perot, a former Presidential candidate of the Reform Party, that is a third political party in the United States, had objected strongly to the creation of the North American Trade Agreement (NAFTA), that nonetheless was inaugurated in the year of 1994

  • Q : Explain in brief about financial ratio

    Explain in brief about financial ratio?