The effects of the stock market and commodity prices on structural credit risk measures of airline companies
This paper sought to identify whether different expected default probabilities (EDPs) measures could be distinguished based on different stock market indices and commodity prices. Three structural credit risk models, namely, Merton (1974), Longstaff and Schwartz (1995) and Leland and Toft (1996) wer...
| Main Authors: | , , |
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| Other Authors: | |
| Format: | Final Year Project (FYP) |
| Language: | English |
| Published: |
2009
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| Subjects: | |
| Online Access: | http://hdl.handle.net/10356/15097 |
| _version_ | 1811693254604750848 |
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| author | Chng, Yuan Fang Dai, Dan Tay, Elaine Ee Ling |
| author2 | Lee Hon Sing |
| author_facet | Lee Hon Sing Chng, Yuan Fang Dai, Dan Tay, Elaine Ee Ling |
| author_sort | Chng, Yuan Fang |
| collection | NTU |
| description | This paper sought to identify whether different expected default probabilities (EDPs) measures could be distinguished based on different stock market indices and commodity prices. Three structural credit risk models, namely, Merton (1974), Longstaff and Schwartz (1995) and Leland and Toft (1996) were used to derive the EDPs. A sample of 83 U.S. airline companies was examined for the period between 2 January 1961 and 31 December 2007. After removing the time-series effects, a regression analysis was conducted against the Dow Jones Industrial Average, the AMEX Airline Index, and the West Texas Intermediate (WTI) crude oil prices. It was found that the Dow Jones Industrial Average better accounted for the EDPs calculated using the Longstaff and Schwartz model as opposed to the Merton and the Leland and Toft models. On the other hand, the WTI crude oil prices were better at accounting for the EDPs calculated using the Leland and Toft model. The results indicated that stock market information had greater explanatory power for the Longstaff and Schwartz model, whereas commodity prices provided greater explanatory power for the Leland and Toft model. These findings have potentially important implications for portfolio managers in the selection and adoption of EDPs measures in credit risk valuation. |
| first_indexed | 2024-10-01T06:48:46Z |
| format | Final Year Project (FYP) |
| id | ntu-10356/15097 |
| institution | Nanyang Technological University |
| language | English |
| last_indexed | 2024-10-01T06:48:46Z |
| publishDate | 2009 |
| record_format | dspace |
| spelling | ntu-10356/150972023-05-19T05:45:00Z The effects of the stock market and commodity prices on structural credit risk measures of airline companies Chng, Yuan Fang Dai, Dan Tay, Elaine Ee Ling Lee Hon Sing Nanyang Business School DRNTU::Business::Finance::Risk management This paper sought to identify whether different expected default probabilities (EDPs) measures could be distinguished based on different stock market indices and commodity prices. Three structural credit risk models, namely, Merton (1974), Longstaff and Schwartz (1995) and Leland and Toft (1996) were used to derive the EDPs. A sample of 83 U.S. airline companies was examined for the period between 2 January 1961 and 31 December 2007. After removing the time-series effects, a regression analysis was conducted against the Dow Jones Industrial Average, the AMEX Airline Index, and the West Texas Intermediate (WTI) crude oil prices. It was found that the Dow Jones Industrial Average better accounted for the EDPs calculated using the Longstaff and Schwartz model as opposed to the Merton and the Leland and Toft models. On the other hand, the WTI crude oil prices were better at accounting for the EDPs calculated using the Leland and Toft model. The results indicated that stock market information had greater explanatory power for the Longstaff and Schwartz model, whereas commodity prices provided greater explanatory power for the Leland and Toft model. These findings have potentially important implications for portfolio managers in the selection and adoption of EDPs measures in credit risk valuation. BUSINESS 2009-03-25T08:40:34Z 2009-03-25T08:40:34Z 2009 2009 Final Year Project (FYP) http://hdl.handle.net/10356/15097 en Nanyang Technological University 56 p. application/pdf |
| spellingShingle | DRNTU::Business::Finance::Risk management Chng, Yuan Fang Dai, Dan Tay, Elaine Ee Ling The effects of the stock market and commodity prices on structural credit risk measures of airline companies |
| title | The effects of the stock market and commodity prices on structural credit risk measures of airline companies |
| title_full | The effects of the stock market and commodity prices on structural credit risk measures of airline companies |
| title_fullStr | The effects of the stock market and commodity prices on structural credit risk measures of airline companies |
| title_full_unstemmed | The effects of the stock market and commodity prices on structural credit risk measures of airline companies |
| title_short | The effects of the stock market and commodity prices on structural credit risk measures of airline companies |
| title_sort | effects of the stock market and commodity prices on structural credit risk measures of airline companies |
| topic | DRNTU::Business::Finance::Risk management |
| url | http://hdl.handle.net/10356/15097 |
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