Distance-to-Default Models Distance-to-Default Models are mainly derived from the option pricing theory. Structural (eg. Merton, 1974) and reduced form (e.g. Hull & White, 2000) models were derived from Merton's model on pricing of corporate debt (bonds), which are widely used to forecast probabilities of default (PD) and distance: to default (DVD) IF The DID measures how many standard deviations a non-financial firm is away from (distance to) a default risk (Black & Cox, 1976). The default point is when the book value of the debt exceeds the market value of assets, causing the firm a failure to service a portion or all of its debt obligations in this situation, the firm is considered to be in default. Q: Are there different definitions of DEFAULT firms? Q: Is there a list of DEFAULT firms defined by different default definition that can be used to compute the DID? Q: How is the DEFAULT point defined? Distance-to-Default Models Distance-to-Default Models are mainly derived from the option pricing theory. Structural (eg. Merton, 1974) and reduced form (e.g. Hull & White, 2000) models were derived from Merton's model on pricing of corporate debt (bonds), which are widely used to forecast probabilities of default (PD) and distance: to default (DVD) IF The DID measures how many standard deviations a non-financial firm is away from (distance to) a default risk (Black & Cox, 1976). The default point is when the book value of the debt exceeds the market value of assets, causing the firm a failure to service a portion or all of its debt obligations in this situation, the firm is considered to be in default. Q: Are there different definitions of DEFAULT firms? Q: Is there a list of DEFAULT firms defined by different default definition that can be used to compute the DID? Q: How is the DEFAULT point defined