I'm questionning myslef on the data used by Altman to calculate his
mortality rate. I think that he is using the value of defaulting debt
in the numerator (vs amount lost on defaulting debt) but it seams that
NEAS think that its the opposite. Here's a simple numerical example to
illustrate this situation:
2 bonds; par #1=1000; par #2=500; #2 default in 1st year with a
residual value of 250$;
Does the mortality rate=1/3(500/1500) or 1/6(250/1500)?
I think its 1/3 based on the fact that when Altman try to verify the
reasonableness of his mortality rate he compares his results with the
1,86% calculate in the traditional method instead of 1,2%(default lost
amount).
What do you think?
Denis