Construct · 1 fields · 1 citations

Merton model: a standalone construct

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Finance

structural credit risk model that treats a firm's equity as a call option on its assets, so default occurs when asset value falls below debt at maturity.

In finance, Merton model refers to structural credit risk model that treats a firm's equity as a call option on its assets, so default occurs when asset value falls below debt at maturity. This meaning comes from Merton (1974) in The Journal of Finance.[1]

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Nearby constructs

default3 fields · 3 citationsjingle · one word, three constructs asset2 fields · 2 citationsjingle · one word, two constructs credit2 fields · 2 citationsjingle · one word, two constructs

References

Merton, R. C. (1974). On the Pricing of Corporate Debt: the Risk Structure of Interest Rates. The Journal of Finance, 29(2), 449-470. https://doi.org/10.1111/j.1540-6261.1974.tb03058.x

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