Does using time-varying target leverage ratios in structural credit risk models improve their accuracy?

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dc.contributor.author Hui, C
dc.contributor.author Wong, T
dc.contributor.author Lo, C
dc.contributor.author Huang, N
dc.date.accessioned 2014-04-03T01:25:12Z
dc.date.issued 2012-01
dc.identifier.citation Journal of Risk Model Validation, 2012, 6 (3), pp. 27 - 49
dc.identifier.issn 1753-9579
dc.identifier.other C1 en_US
dc.identifier.uri http://hdl.handle.net/10453/23273
dc.description.abstract Empirical findings and theoretical studies suggest that firms adjust toward time-varying target leverage ratios. This paper studies the performances of the default probabilities generated from two structural credit risk models (one with time-dependent leverage ratios and one with constant target leverage ratios) and credit ratings. The time-dependent model consistently performs better than the other model and credit ratings in terms of having the discriminatory power to differentiate firms' default risk and the capability to predict default rates over the period from 1996 to 2006. The material differences between the predictive capability of the two models show that the time dependency of the target leverage ratio is a critical factor in modeling credit risk. The study also provides evidence to support the existence of a time-varying target leverage ratio
dc.publisher Incisive Media Ltd.
dc.subject DEBT, DYNAMICS, DECISIONS, OPTIONS, CHOICE
dc.subject DEBT; DYNAMICS; DECISIONS; OPTIONS; CHOICE
dc.title Does using time-varying target leverage ratios in structural credit risk models improve their accuracy?
dc.type Journal Article
dc.parent Journal of Risk Model Validation
dc.journal.volume 3
dc.journal.volume 6
dc.journal.number 3 en_US
dc.publocation London, UK en_US
dc.identifier.startpage 27 en_US
dc.identifier.endpage 49 en_US
dc.cauo.name BUS.Finance en_US
dc.conference Verified OK en_US
dc.for 1502 Banking, Finance and Investment
dc.personcode 0000095133 en_US
dc.personcode 0000095134 en_US
dc.personcode 0000095135 en_US
dc.personcode 995935 en_US
dc.percentage 100 en_US
dc.classification.name Banking, Finance and Investment en_US
dc.classification.type FOR-08 en_US
dc.edition en_US
dc.custom en_US
dc.date.activity en_US
dc.location.activity en_US
dc.description.keywords DEBT; DYNAMICS; DECISIONS; OPTIONS; CHOICE en_US
dc.description.keywords DEBT
dc.description.keywords DYNAMICS
dc.description.keywords DECISIONS
dc.description.keywords OPTIONS
dc.description.keywords CHOICE
dc.staffid 995935 en_US
pubs.embargo.period Not known
pubs.organisational-group /University of Technology Sydney
pubs.organisational-group /University of Technology Sydney/Faculty of Business
pubs.organisational-group /University of Technology Sydney/Faculty of Business/Finance


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