Estimation of Default Probabilities: Application of the Discriminant Analysis and the Structural Approach for Companies Listed on the BVC - Journal of Financial Risk Management

JFRM > Vol.6 No.3, September 2017

Volume 6, Issue 3 (September 2017)

ISSN Print: 2167-9533 ISSN Online: 2167-9541

Google-based Impact Factor: 1.09 Citations

Estimation of Default Probabilities: Application of the Discriminant Analysis and the Structural Approach for Companies Listed on the BVC ()

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Download as PDF (Size: 730KB) PP. 285-299

DOI: 10.4236/jfrm.2017.63021 2,857 Downloads 5,505 Views Citations

Author(s)

Lahsen Oubdi, Abdessamad Touimer

Affiliation(s)

Laboratory of Industrial Engineering and Computer Science, National School of Applied Sciences (ENSA), Agadir, Morocco.

ABSTRACT

This article aims to compare the calculated results of the structural approach (Internal Ratings-Based IRB) and the discriminant analysis (Z-score of Altman, 1968), based on data from companies listed on the BVC for the period from 02 January 2014 to December 31, 2014. The structural approach is directly linked to the economic reality of the company; the default takes place as soon as the market value of these assets falls below a certain threshold. The major constraint for this approach is the determination of the probabilities of default. This situation is overcome by using the Black & Scholes (1973) model, based on Monte Carlo simulations. While the Z-score method is a financial analysis technique of business failure predictions, which is based on financial and economic ratios.

KEYWORDS

Credit Risk, IRB Approach, Z-Score, Monte Carlo Simulation, Default Probability

Share and Cite:

Oubdi, L. and Touimer, A. (2017) Estimation of Default Probabilities: Application of the Discriminant Analysis and the Structural Approach for Companies Listed on the BVC. Journal of Financial Risk Management, 6, 285-299. doi: 10.4236/jfrm.2017.63021.

Cited by

[1]	Study of endogenous and exogenous factors impact's on the default probability of listed companies on the Casablanca Stock Exchange
	2019

[2]	STUDY OF FIRST 10 COMPANIES IDENTIFIED BY RBI FOR BANKRUPTCY PROCEEDINGS UNDER IBC, 2016
	2019

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