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Quasi-maximum likelihood for estimating structural models

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9 fév. 2022   11h00 — 12h00

Hatem Ben-Ameur Professeur titulaire, Département de sciences de la décision, HEC Montréal, Canada

Hatem Ben-Ameur

Présentation sur YouTube

The structural model of Merton (1974) gives rise to multiple applications and extensions in corporate credit-risk analysis. The estimation of this framework poses a major challenge as its underlying state variable (the firm's asset value) is not directly observable. Since Duan (1994), maximum likelihood has become the benchmark to estimate structural models where corporate securities are valued in closed form. We propose a quasi-maximum likelihood (QML) approach that remains appropriate even when the explicit approach is unachievable. QML is highly flexible and effective. To assess our construction, we conduct an empirical investigation, highlight the credit-spread puzzle, and discuss a remedy via bankruptcy costs.
(with Malek Ben-Abdellatif, ESLCA, Rim Chérif, AUC and Tarek Fakhfakh, FSEG Sfax)

Olivier Bahn responsable

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Montréal Québec Canada

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