问题如下:
The KMV model produces a measure called expected default frequency. Which of the following statements about this variable is correct?
选项: It
decreases when the leverage of the firm falls.
It increases when the stock price of the firm has been rising.
C.It is the risk-neutral probability of default from Merton’s model.
D.It tells investors how the default risk of a bond is correlated with the default risk of other bonds in the portfolio
解释:
ANSWER: A
The EDF, similarly to the risk-neutral PD, decreases when the stock price goes up, when the leverage goes down, or when the volatility goes down. It is a transformation of the PD from a Merton-type model. The KMV framework can be extended to finding correlations, but the EDF is not sufficient.
为什么当stock price goes up,or leverage goes down时,dd会下降?