**Modeling Default Probability via Structural Models of Credit Risk in Context of Emerging Markets Credit Risk in Context of Emerging Markets**

**Modeling Default Probability via Structural Models of** 

DOI: 10.5772/intechopen.71021

Maria Kovacova and Boris Kollar Additional information is available at the end of the chapter

Maria Kovacova and Boris Kollar

Additional information is available at the end of the chapter

http://dx.doi.org/10.5772/intechopen.71021

#### **Abstract**

The chapter is focused on the structural models of credit risk introducing basic concepts of risk-neutral world, as well as models and different options for the credit risk quantification. An important part is also the introduction of structural approach for credit risk modeling. Furthermore, the chapter presents basic division of structural models and then presents mathematical derivation of individual apparatuses of models. Among tested models are Merton model, KMV model, Black-Cox model, and Credit Grades model. The practical part is focused on the application of these models under the conditions of local emerging market—Slovakia. Additionally, it pointed out the connection between default probability and credit spreads generated with the use of default mode credit risk models. The main objective is to adjust credit risk model to real market data.

**Keywords:** credit risk, financial modeling, probability of default, credit spread, structural models
