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Research Paper | Management | Morocco | Volume 6 Issue 8, August 2017 | Popularity: 6.5 / 10

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Credit Risk Assessment: The Structural Approach (MERTON Model) Applied to the Moroccan Banking Sector

Ezouine Driss

Abstract: A complete financial modeling of the firm is fundamentally based on several factors the dynamics of the firm's assets, the contractual structure of priority between beneficiaries (the absolute priority of holders of debt on shareholders, for example), the recovery rate in case Of liquidation. The structural approach emerged in the early 1970s on the initiative of Fisher Black, Myron Scholes and Robert Merton. These authors have shown that any financing title could be identified with a derivative contract on the value of the firm's assets. Having made possible the modeling of the default risk, which made this approach very usable in many works The problems facing the banks with regard to the quality of the borrower are as follows How to calculate the probability of default of the counterparty through and that it would be the recovery rate in case of default? What if the interest rate is dynamic (flat rate curve)? How to calculate the capital needed to face this same probability of default?

Keywords: Merton Model, Structural Model, Probability of Default PD, Vasicek Model, Recovery Rate

Edition: Volume 6 Issue 8, August 2017

Pages: 1431 - 1444

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