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CFA Level 2
Fixed Income

Understanding the Purpose of Structural Models in Credit Analysis

Very Easy Credit Analysis And Valuation Structural Models

In the context of credit analysis, structural models are utilized to assess the creditworthiness of firms based on their financial structure. These models often incorporate variables such as firm value, liabilities, and the probability of default. A structural model operates under the premise that default occurs when the value of a firm's assets falls below a certain threshold.

Which of the following best describes the primary purpose of structural credit models?

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