A flow-based corporate credit model

A flow-based corporate credit model The main purpose of this paper is to develop a flow-based corporate credit model. This model can concurrently and endogenously generate a firm’s multi-period probabilities of liquidity crunch and expected liquidity shortfalls. This study builds a state-dependent internal liquidity model that incorporates both systematic and idiosyncratic shocks into corporate internal liquidity dynamics. The flow-based credit model differs from structural form credit models in that it considers a flow-based insolvency rather than a stock-based one, and has a potential to capture short-term credit information. Additionally, it differs from both reduced form and traditional accounting-based bankruptcy prediction models in that it is able to provide multi-period expected liquidity shortfalls endogenously. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

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Publisher
Springer US
Copyright
Copyright © 2010 by Springer Science+Business Media, LLC
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-010-0186-z
Publisher site
See Article on Publisher Site

References

  • Financial ratios, discriminant analysis, and the prediction of corporate bankruptcy
    Altman, EI
  • Valuing corporate securities: some effects of bond indenture provisions
    Black, F; Cox, JC
  • An integrated multi-model credit rating system for private firms
    Butera, G; Faff, R
  • Estimating the price of default risk
    Duffee, GR
  • Modeling the term structures of defaultable bonds
    Duffie, D; Singleton, KJ

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