| "The Impact of Exchange Rate Exposure on Multinationals' Credit Risk" study explores the correlation between exchange rate exposure and multinationals credit risk. Existing credit risk models do not distinguish between domestic and multinational companies, thus excluding the unique implications of exchange rate exposure on multinationals' credit risk. Empirical results reveal that when stochastic foreign exchange exposure is incorporated into the Merton structural model, most implied default probabilities slightly increase. Parametric and nonparametric tests point to statistically significant differences between the traditional Merton model and the new multinationals model. Significant correlations are found between this rise in implied default probabilities and assets-exchange rate correlation, exchange rate volatility and physical assets' book value. The proposed multinationals model is found to have a higher predictive power, leading to economically significant improved performance over loan portfolios. A simulation experiment illustrates the superiority of the new multinationals model within observed lenient policy.;The "Homogeneous Markov Chain, Stochastic Economic, and Non-Homogeneous Models for Measuring Corporate Credit Risk" study discovers some of the factors affecting the survivability of different debt portfolios, presents quantitative and comparative measurements for default rate and distance to default within a portfolio perspective, and suggests various approaches for simulating ratings migration. The data sample used to test the models contains the S&P long-term credit ratings of industrial companies in North America from 1985 to 2004. A comparative analysis of the alternative models reveals that the density-dependent model is the most realistic approach, outperforming the homogeneous model in describing empirically observed ratings transitions. The measurements presented in this study can be used to compare and sort different debt portfolios with respect to their credit risk components, and to price credit-sensitive securities.;"A Review of Developments in Credit Structural Models and Credit Ratings Migration Analysis" is a survey reviewing past developments in structural models of credit risk, started with the Merton's framework in 1974, and credit ratings migration analysis, as well as introduces recent schemes in these two methodologies. The advantages and disadvantages of each approach are further discussed and compared. |
