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default point

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default point

The total revenues necessary from a project to pay all the bills with nothing left over—the point at which $1 more in revenues creates a profit and $1 less forces one to default on paying creditors unless additional capital is injected into the project.See break-even point.



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Current asset's value * Distribution of the asset's value * Volatility of the asset's value * Default point or debt's value * Expected growth rate of the asset's value * Time horizon Once the model is parameterised, we can define the EDF (expected Default Frequency) which is the probability that the assets' value be inferior to the debt's value.
The default point is thus assumed to be somewhat lower than the value of total debt.
 
 
 
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