Assessment of Credit Spread in Default Risk using Merton Model
George Godfrey Jumbe, Ravi Gor
Default Risk, Merton Model, leverage Ratio, Probability of Default, Credit Spread.
This study uses the Merton model to compare the credit spreads for three companies: Hindustan Aeronautics (HA), Eicher Motors (EM), and Adan Enterprises (AE). We use the balance sheets recorded from Ticker data from March 2018 to March 2022. We start by calculating the debt to asset leverage ratios of the three companies and use the ratios to compare their credit spreads. Results indicates that, EM is a low leverage company with 0.41 ratio, HA a medium leverage company with 0.67 ratio and AE a high leverage company with 0.96 ratio.
Article Details
Unique Paper ID: 158487

Publication Volume & Issue: Volume 9, Issue 9

Page(s): 664 - 671
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