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Moody's KMV EDF™ (Expected Default Frequency) credit risk measures are powerful forward-looking default probabilities for public and private companies. EDF measures are actual probabilities of default; they lend themselves to precise decision-making and can be incorporated into valuation and portfolio models. built from over 15 years of experience with market and fundamental data and modeling, EDF measures have been extensively validated on defaults and credit spreads and have become the de facto standard for lenders and investors.
Public company EDF credit measures are based on extracting collective, real-time intelligence from markets globally. A public firm’s probability of default is calculated from three drivers—the market value of its assets, its volatility, and its current capital structure. For each firm, the EDF credit measure captures the distilled credit insight from the equity market and combines it with a detailed picture of the company’s current capital structure.
Private company EDF measures are powered by the unique insight provided by the world’s largest private company database, Moody’s KMV proprietary Credit Research Database™ (CRD). Fundamental data on private firms are lined up with extensive observations of default to capture the predictors and their impact on default. Our research has demonstrated that these private company credit risk drivers differ across countries. To capture these differences we have created a network of Moody’s KMV RiskCalc® models that capture the fundamental drivers of default for private firms across a wide array of countries accounting for more than 75% of global GDP. |
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