I want to examine whether corporate events affect firm's probability of default. My initial thought was a jump diffusion model, although in the literature, the only work I found, involved CDS market prices. The sector under investigation is transportation and firms are Mid-Cap without CDSs written on their debt. Is there a stochastic approach to estimate PD (Not referring to Altman Z-Scoring or any other logit-probit models).

KMV would be a could starting point,although the Expected Default Frequency needed to map Distance to Default is unknown, since it requires heavy calculations.

Any paper or lecture notes are welcomed

  • $\begingroup$ Creditgrades developed by Riskmetrics is the 2000s was a modified version of Merton/KMV designed for better handling short term and long term PD, and that would take as input Bloomberg data fields so it would be easy to run. You might try googling it. $\endgroup$ – Antoine Conze Jun 22 '18 at 6:49

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