Comparison of Default-Risk Probability Prediction Models: A Case Study of Corporrate Bond in Thailand

Abstract

This research aimed to study and compare the performance of default-risk probability prediction models in the repayment of private debt securities listed on the Stock Exchange of Thailand. Using the option-based models, including the Merton Model, the Barrier Option Model, and average probability from Merton Model and Barrier Option Model, by collecting data from corporate bonds with credit ratings from credit rating companies during the years 2017 – 2021. The result revealed that all three models were effective. The Merton Model had better accuracy than the Barrier Option Model. The performance in the classification of the credit rating of the bond is still not good enough. There may be factors in addition to the financial information that can affect the reliability. However, all three models are still effective in analyzing the financial problems of the company.