Financial Modelling - Essay Example

Only on StudentShare

Extract of sample
Financial Modelling

This paper models an approach for estimation of the probability of default (PD) using publicly available information. It borrows from past research to develop an analytical approach and explore the provided data sample. Regulators are conventionally not the single constituency of individuals interested in PD estimate properties. Typically, PDs are products of credit asset pricings, from bonds, loans, as well as sophisticated instruments including credit derivatives. These are often needed for successful risk management. According to (DDDDD), default is however considered a rare event, more particularly, for high credit quality firms which constitute a bulk of huge corporate segment in any of the big banks. However, PDs can systematically vary with business cycle and hence unlike to remain stable over time. In this report, a number of factors are identified, factor which shape or rather act as determinants of probability of default. These include price to book ratio, age of firm, region where firm is located, firm’s sector, debt ratio, and size of the firms. According to Freedman (2005) regression analysis includes modeling and analysis of variables, with special focus on the relationship between a dependent variable and a set of independent variables. Its helps a researcher establish how the dependent variable is alters when one or more of the dependent variable is varied. ...
Download paper


Probability of default Name: Institution: Probability of default Banks consider credit risks, a dominant source of risk and hence the banks subject it to strict oversight. Additionally, credit risks remain one of the central topics in financial policy debates…
Author : xaufderhar

Related Essays

Financial and Strategic Management of Projects
The analysis of cash flows assists the CEOs and other top officials in ensuring that the investments made by the company is giving adequate return and company’s funds are not tied up in all the wrong ventures. Such an analysis cannot be made via Balance sheet analysis which represents the value of the assets on historical cost or the market value. From the perspective of a newly launched company, it is of prime importance to the management to ensure whether the operations are being conducted in the most prudent manner and are generating sufficient cash flows. Cash stream is considered to be...
3 pages (753 words) Essay
Giving a Critique of the Usefulness of Spreadsheet Modelling in Financial Accounting and Reporting
Computer spreadsheets are very much beneficial in manipulating large volume of data very easily and in quickly (Moutinho, et al., 1994, p.26-27). Spreadsheets are very much useful in modelling situations in financial accounting and helps in various decision making processes. Uses of Spreadsheets Spreadsheets are argued to be most frequently used by most of the organisations all over the world. There are many tailor-made tools available in spreadsheets which perform specific business processes (Baker, et al., n.d.). There is an increased popularity in the use of spreadsheets in business...
6 pages (1506 words) Essay
Financial Modeling Essay
It has been argued that this economic turmoil has rendered portfolio management theories irrelevant. This paper explores this assertion. Recent Upheavals in World Financial Markets The global financial crisis of the 21st century has been described as the greatest economic and financial crisis the world has seen since the Great Depression of the 1930s (Ciro 2012). This economic turmoil, unlike the 1930s depression, caught many by surprise. Governments, investors, and the knowledgeable and sophisticated market participants were caught unawares by the speed and intensity of the economic decline....
3 pages (753 words) Essay
Marketing Environment of the Financial Services Industry
Modification of this law recognizes the comparative development of the DIFC and strengthens its autonomy from onshore legislators. These legislative alterations with regard to DIFC examine what can be anticipated in terms of future regulations inside UAE financial services segment. This will significantly aid in encouraging business in the area. The significant bodies of the DFIC are maintained which have distinct pecuniary units with independent budget lines. The new amendment also clarifies the governance and executive structures of the three significant bodies. The new duties are to...
6 pages (1506 words) Essay
Financial Modelling Report
In addition, regression analysis will be conducted to especially find out the patterns of the regression equations and the p-value. This will help support the null hypothesis that the predictors play some role in the stock return. A number of theories will be put forward to try and explain the results of the study. MN7024-Financial Modelling Introduction Return on stock is influenced by various factors, among them including the size of a firm, book-to-market ratio, and beta. In addition, different regions of the world have exhibited different patterns in regards to stock return depending on...
8 pages (2008 words) Essay
Returns to an Asset
Having knowledge of the statistical properties also makes it easier to evaluate the efficiency of the financial assets. The financial assets are then modelled for better knowledge of the returns. Background to the Data Sample There are many concepts that are adopted in the finance to make the concept of finance management more clear. Some of the concepts are considered to the appropriate for other branches and some are altered to suite the financial setup. Interest is considered as one of the fundamental concepts incorporated in finance and related organizations. Interest is termed as the...
8 pages (2008 words) Essay
Financial Modelling
, Total assets of company (expressed in £ millions), Extent of team working within the company (expressed as a percentage), Scheme (coded as 1 if company has a profit sharing scheme) and 0 otherwise, Market share of company (expressed as a percentage), the age of the company (since how many years it was established) and lastly, Return on capital employed (also expressed as a percentage). First we show graphical representation of the data to understand any issues or patterns which arise from the data, we then conduct univariate and bivariate analysis to find out if there is a correlation...
7 pages (1757 words) Research Paper
Got a tricky question? Receive an answer from students like you! Try us!