The focus of this dissertation is to quantify the probability of firm default focusing on the top 42 non-financial firms listed on the Johannesburg Stock Exchange. This paper follows the same methodology as outlined in the Moody's KMV white papers in implementing the Merton (1974) model. The model of default prediction builds upon option theory as pioneered by Black and Scholes and derives the probability of default predominately from the price and volatility of equity. In addition, BEE (Black Economic Empowerment) transactions currently being experienced within the South African corporate sector are further incorporated into the model. The results of this dissertation show that the Merton (1974) model may be used as a source of information of the underlying credit risk of publicly traded firms in South Africa.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:uct/oai:localhost:11427/19041 |
| Date | January 2007 |
| Creators | Van Breda, Ryan |
| Contributors | Holman, Glen |
| Publisher | University of Cape Town, Faculty of Commerce, Department of Finance and Tax |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Master Thesis, Masters, MCom |
| Format | application/pdf |
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