Quantifying credit risk I: Default prediction

Until the 1990s, corporate credit analysis was viewed as an art rather than a science because analysts lacked a way to adequately quantify absolute levels of default risk. In the past decade, however, a revolution in credit-risk measurement has taken place. The evidence front-t this research presents a compelling case that the conceptual approach pioneered by Fischer Black, Robert Merton, and Myron Scholes provides a power fill practical basis for measuring credit risk.