Year of Graduation
Credit Risk Prediction with Merton Model Based on Nonlinear SDE
Merton model is a structural probability-of-default model. Like many others, this model based on effective market hypothesis, which has been criticized for a long time. According to the fractal market hypothesis, the model can be revised and modified. This research is aimed at construction theoretical model with regard to possibility nonlinear structure of generating a system of equations. The second goal is to develop a useful tool for PD estimation based on the constructed model.