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Understanding the relationship between Merton Probability of Default (PD) and the Black-Scholes Mode
Hello Sleepybird. Demonstration below. If you have any doubt, just reply. Firs, some notation: eq 1: E = F (F is only a function os company assets) eq 2: W = F - D*V; F (firm value), D(Number of assets to buy), F(firm asset function value) eq 3: dV=r*dt*V + SigV*dW*V (risk neutral world) eq 4...- Mauricio Bedoya (Pass all Levels of CFA)
- Post #10
- Forum: P2.T6. Credit Risk (25%)