Credit Risk Spreadsheet from today’s class meeting of Finance 4335

Linked below is the Credit Risk Spreadsheet that I built from scratch from today’s class meeting of Finance 4335. In cells A16:B21, the comparative statics of the probability of default are listed. Other things equal, the probability of default is negatively related to the value of the firm’s assets (V(F)), the rate of interest (r), and the time to maturity for the firm’s bonds (T). On the other hand, the probability of default is positively related to the firm’s financial leverage (as measured by B) and the risk of the firm’s assets (as measured by sigma).

Credit Risk Spreadsheet.xlsx

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