This article aims to
compare the calculated results of the structural approach (Internal
Ratings-Based IRB) and the discriminant analysis (Z-score of Altman, 1968), based on data from
companies listed on the BVC for the period from 02 January 2014 to December 31,
2014. The structural approach is directly linked to the economic reality of the
company; the default takes place as soon as the market value of these assets
falls below a certain threshold. The major constraint for this approach is the
determination of the probabilities of default. This situation is overcome by
using the Black & Scholes (1973)model,
based on Monte Carlo simulations. While the Z-score method is a financial
analysis technique of business failure predictions, which is based on financial
and economic ratios.
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