Alternative bankruptcy prediction models using option-pricing theory
Ημερομηνία
2013Source
Journal of Banking and FinanceVolume
37Pages
2329-2341Google Scholar check
Keyword(s):
Metadata
Εμφάνιση πλήρους εγγραφήςΕπιτομή
We examine the empirical properties of the theoretical Black-Scholes-Merton (BSM) bankruptcy model. We evaluate the predictive ability of various existing modifications of the BSM model and extend prior studies by estimating volatility directly from market-observable returns on firm value. We show that parsimonious models using our direct market-observable volatility estimate perform better than alternative, more sophisticated, models. Our findings suggest the adoption of simpler modelling approaches relying on market data when implementing the BSM model. © 2013 Elsevier B.V.