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Credit Engineering for Bankers, 2nd Edition by Johnathan Mun, Morton Glantz

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Chapter 18 Credit and Debt Valuation

Chapter Outline

  • Illustrations in Credit Analysis 453
    • Credit Premium 453
    • Credit Risk Analysis and Effects on Prices 455
    • External Debt Ratings and Spread 456
    • Internal Credit Risk Rating Model 458
    • Profit-Cost Analysis of New Credit 458
  • Illustrations in Debt Analysis 459
    • Asset-Equity Parity Model 459
    • Cox Model on Price and Yield of Risky Debt with Mean-Reverting Rates 461
    • Debt Repayment and Amortization 463
    • Procedure 464
    • Results Interpretation 464
    • Debt Sensitivity Models 464
    • Merton Price of Risky Debt with Stochastic Asset and Interest 467

This chapter reviews the fundamentals of credit and debt valuation, including what credit risk premium should be charged to an obligor with a specific probability ...

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