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| Author: | Duffie, D. Saita, L. Wang, K. |
| Title: | Multi-period corporate default prediction with stochastic covariates |
| Journal: | Journal of Financial Economics
2007 : MAR, VOL. 83:3, p. 635-665 |
| Index terms: | defaults bankruptcy bankruptcy forecasting duration analysis |
| Language: | eng |
| Abstract: | The study provides maximum likelihood estimators of term structures of conditional probabilities of corporate default and it incorporates the dynamics of firm-specific and macroeconomic covarietes. The method is applied to data from US-listed industrial firms over 1980-2004. The main findings are that the term structure of conditional future default probabilities depends on the firm's trailing stock return, on trailing S&P 500 returns, on US interest rates and especially on a firm's distance to default (a volatility adjusted leverage measure popular in banking industry). The out-of-sample predictive performance of this model is considered as an improvement over that of other models available. |
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