B1_2
Erstes Buch Kartei 2
Erstes Buch Kartei 2
Kartei Details
| Karten | 15 |
|---|---|
| Sprache | English |
| Kategorie | Biologie |
| Stufe | Andere |
| Erstellt / Aktualisiert | 09.10.2021 / 16.10.2021 |
| Lizenzierung | Keine Angabe |
| Weblink |
https://card2brain.ch/box/20211009_b12
|
| Einbinden |
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Explain the Altman Z Score
Altman Z Score is an empirical credit models. These do not try to estimate credit spreads or default probability but generate a credit score.
Altman Z Score uses - Liquidity, profitability, leverage, solvency and activity
Z = 1.2*X1 + 1.4* X2 ! 3.3*X3 + 0.6*X4 + 1*X5
X1 = working capital / total assets ratio
X2 = retained earnings / total assets ratio
X3 = EBIT / total assets ratio
X4 = Market value of equity / book value of total liabilities ratio
X5 = sales / total assets
How do you interprete the Altman Z Score?
If Z < 1.81 Default (or distressed)
1.81 <=Z <= 2.99 Gray Zone
Z > 2.99 Nondefault or safe
1. The exposure at default for a loan is $250 million, the recovery rate is estimated to be 31.4%, and the estimated probability of loss is 1.15%. The expected loss is:
LGD = EAD * (1-RR) = 250 * (1-0.314) = 171.50
E(Loss) = LGD * PD = 171.50 * 0.0115 = 1.972
2. An analyst is considering a bond in a leverage company and wants to model credit risk as a random exogenous variable. The analyst should use:
Reduced form model
structural model
positive model
empirical model
Reduced form models treat default risk as a random external variable
structural model view credit risk from the perspective of equity holders
positive models explore how assets should behave and
empirical models do not directly evaluate default risk
