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Title: Alternative bankruptcy prediction models using option-pricing theory
Authors: Charitou, Andreas 
Dionysiou, Dionysia 
Lambertides, Neophytos 
Trigeorgis, Lenos 
Keywords: Bankruptcy prediction;Option-pricing theory;Volatility estimation
Category: Economics and Business
Field: Social Sciences
Issue Date: 1-Jul-2013
Publisher: Elsevier
Source: Journal of Banking and Finance, 2013, Volume 37, Issue 7, Pages 2329-2341
Abstract: 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.
ISSN: 03784266
Rights: © 2013 Elsevier B.V.
Type: Article
Appears in Collections:Άρθρα/Articles

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