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Financial Risk Manager Part 2

Financial Risk Manager Part 2

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You are given the following information about firm A:

  • Market value of asset at time 0 = 1000
  • Market value of asset at time 1 = 1200
  • Short-term debt = 500
  • Long-term debt = 300
  • Annualized asset volatility = 10%

According to KMV model, what are the default point and the distance to default at time 1?

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