This process usually extends the effective
default point to 420 days after the borrower made an on-time payment.
He said, 'Pakistan is reaching at a
default point very soon-it would not be able to repay its external debt-which has crossed $73 b.
The tabulated results are based on setting the default point equal to the sum of (1) debt in current liabilities, plus (2) 50% of long-term debt.
Credit rating = f(COV, ROA, VOL, LEV, SIZE, SIGE, MVE, MVA_X), (ACCT-MKT) where SIGE is the daily standard deviation of stock returns, MVE is the natural log of market value of equity, and MVA_X is the natural log of the ratio of market value of assets to the default point. The addition of these variables follows Du and Suo (2007).
Distance to default (DTD): DTD measures the number of standard deviation moves required to bring expected total asset value to the default point. DTD is computed using the SAS code provided by Hillegeist et al.
The authors find that the rational
default point is below the underwater mark, at which the house price equals the remaining loan balance.
For that reason, Vasicek- Kealhofer KMV model measures the distance to the default using the number of standard deviations from the assets' value to reach the
default point .
The level at which an enterprise is assumed to default on its debt obligations is called the
default point. On the basis of studies of default statistics, KMV chooses to calculate this level as the value of the enterprise's short-term debt plus a portion of its long-term debt.
(3) We also find that the signal-to-noise ratio of subordinated debt spreads should be quite low far away from the default point of the bank.
The current distance d from the default point (where In [V.sup.T.sub.A] = ln D) can be expressed as:
represents the number of standard deviations that the firm is from the default point. DD depends on [V.sub.A] and [[sigma].sub.A].
For example, arrows that by
default point to the right may be redesigned for left-handed computer users.
