calc_survival_probability_merton: Calculate survival probability

In 2DegreesInvesting/r2dii.climate.stress.test: Climate Transition Risk Stress Test for Listed Equity, Corporate Bond and Corporate Loan Portfolios

Calculate survival probability

Description

Function calculates survival probability for a maturity based on a structural Merton model. For details on implementation please compare CreditRisk::Merton(). Unlike CreditRisk::Merton() this implementation:

1. only holds functionality to calculate probability of survival

2. can be called in vectorised fashion

3. additionally checks that all input values are of the same length

4. additionally checks input vectors for implausible values (r must be => 0 and all other args > 0)

Usage

calc_survival_probability_merton(L, V0, sigma, r, t)

Arguments

L	Numeric vector, holding debt values at maturity.
V0	Numeric vector, holding company values at time t0.
sigma	Numeric vector, holding volatility values.
r	Numeric vector, holding risk free interest rates.
t	Vector vector holding debt maturities.

Value

A vector holding survival probabilities,

2DegreesInvesting/r2dii.climate.stress.test documentation built on June 6, 2024, 8:23 a.m.