Probability of Default - Merton Model
Question 1
With the use of Merton Model, the probability of Default (PD) of each firm is summarized as follow:
Company Name | ASX Code | Probability of Default | Adelaide Brighton Limited | ABC | 0% | Buderim Ginger Limited | BUG | 26.079% | FFI Holdings Limited | FFI | 0.056% | McPherson’s Limited | MCP | 0.003% | Reece Australia Limited | REH | 0% | Vietnam Industrial Investments Limited | VII | 2.472% |
Question 2
Using 15 Sep 2008 as a cut-off point, the pre and post results with respect to the Global Financial Crisis (GFC) analysis of PDs for the above 6 firms are summarized as follow: | | Probability of Defaults | Company Name | ASX Code | 7 years | Pre GFC | Post GFC | Adelaide Brighton Limited | ABC | 0% | 0% | 0% | Buderim Ginger Limited | BUG | 26.079% | 21.716% | 11.693% | FFI Holdings Limited | FFI | 0.056% | 0.695% | 0% | McPherson’s Limited | MCP | 0.003% | 0.012% | 0.056% | Reece Australia Limited | REH | 0% | 0% | 0% | Vietnam Industrial Investments Limited | VII | 2.472% | 17.319% | 5.313% |
Adelaide Brighton Limited (ASX Code: ABC)
The result shows that the probability of defaults for ABC remains constant at 0% both before and after the GFC.
Buderim Ginger Limited (ASX Code: BUG)
Before the GFC, the probability of default for BUG is 21.716%. After the GFC, the probability of default has reduced to approximately 11.693%.
FFI Holdings Limited (ASX Code: FFI)
Before the GFC, the probability of default for FFI is 0.695%. After the GFC, the probability of default has further reduced and reached 0%.
McPherson’s Limited (ASX Code: MCP)
Before the GFC, the probability of default for MCP is 0.012%. After the GFC, the probability of default has increased slightly to 0.056%
Reece Australia Limited (ASX Code: REH)
The result shows that the probability of defaults for REH remains constant at 0% both before and after the GFC.
Vietnam Industrial Investment Limited (ASX Code: VII)
Before the GFC, the
With the use of Merton Model, the probability of Default (PD) of each firm is summarized as follow:
Company Name | ASX Code | Probability of Default | Adelaide Brighton Limited | ABC | 0% | Buderim Ginger Limited | BUG | 26.079% | FFI Holdings Limited | FFI | 0.056% | McPherson’s Limited | MCP | 0.003% | Reece Australia Limited | REH | 0% | Vietnam Industrial Investments Limited | VII | 2.472% |
Question 2
Using 15 Sep 2008 as a cut-off point, the pre and post results with respect to the Global Financial Crisis (GFC) analysis of PDs for the above 6 firms are summarized as follow: | | Probability of Defaults | Company Name | ASX Code | 7 years | Pre GFC | Post GFC | Adelaide Brighton Limited | ABC | 0% | 0% | 0% | Buderim Ginger Limited | BUG | 26.079% | 21.716% | 11.693% | FFI Holdings Limited | FFI | 0.056% | 0.695% | 0% | McPherson’s Limited | MCP | 0.003% | 0.012% | 0.056% | Reece Australia Limited | REH | 0% | 0% | 0% | Vietnam Industrial Investments Limited | VII | 2.472% | 17.319% | 5.313% |
Adelaide Brighton Limited (ASX Code: ABC)
The result shows that the probability of defaults for ABC remains constant at 0% both before and after the GFC.
Buderim Ginger Limited (ASX Code: BUG)
Before the GFC, the probability of default for BUG is 21.716%. After the GFC, the probability of default has reduced to approximately 11.693%.
FFI Holdings Limited (ASX Code: FFI)
Before the GFC, the probability of default for FFI is 0.695%. After the GFC, the probability of default has further reduced and reached 0%.
McPherson’s Limited (ASX Code: MCP)
Before the GFC, the probability of default for MCP is 0.012%. After the GFC, the probability of default has increased slightly to 0.056%
Reece Australia Limited (ASX Code: REH)
The result shows that the probability of defaults for REH remains constant at 0% both before and after the GFC.
Vietnam Industrial Investment Limited (ASX Code: VII)
Before the GFC, the