Modeling Credit Risk with GARCH Process
Date Issued
2007
Date
2007
Author(s)
Liu, Chih-Chun
DOI
zh-TW
Abstract
To calculate the default probability of Taiwan stock market from 2001 to 2007, we conduct Merton (1974) and Altman’s Z-score. In order to use the parameters correctly, we use GARCH process to predict those. We test the power of default prediction by the Receiver Operating Characteristic (ROC) curves and Area under Curve (AUC). The findings of this study are as follows:
1. The GARCH (1, 1) model is superior to the AR(1) model and historical volatility model.
2. The GARCH (1, 1) model is superior to the Altman’s Z-score model.
Subjects
選擇權評價法
信用評分法
違約機率
違約距離
GARCH 模型
ROC 曲線
Option Pricing Model
Z-score Model
Default Probability
Distance to Default
Receiver Operating Characteristic Curve
GARCH process
Type
thesis
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