PPT Slide

Example

Current market value of assets V0 = 1,000

Net expected growth of assets per annum* m = 20%

Expected asset value in one year VT = 1,200

Annualized asset volatility sV = 100

Default point d* = 800

default distance,

Among the population of all the firms with df = 4 at one point in time,

say 5,000 firms, 20 defaulted in one year. Then

* KMV Credit Monitor uses a constant asset growth assumption for all firms in the

same market.