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The mortality rate = (debt that has defaulted during the year)/(total debt
at the beginning of the year)
Mortality rate for 1st year = 250/1500
I am assuming you are saying that 250 of the debt defaulted and 250 was
realized and no longer debt on the first day of the second year.
If no defaults in second year, mortality rate in 2nd year = 0/1000
> -----Original Message-----
> From: Denis Dubois [SMTP:Denis.Dubois@axa-canada.com]
> Sent: Monday, April 19, 1999 11:12 AM
> To: studygroup10@lists.casact.org
> Subject: Altman
>
> Hello people,
>
> 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$;
>
> Does the mortality rate=1/3(500/1500) or 1/6(250/1500)?
>
> I think its 1/3 based on the fact that when Altman try to verify the
> reasonableness of his mortality rate he compares his results with the
> 1,86% calculate in the traditional method instead of 1,2%(default lost
> amount).
>
> What do you think?
>
> Denis
>
>
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The mortality rate ==3D (debt that has defaulted during the year)/(total debt at the =beginning of the year)
Mortality rate for =1st year =3D 250/1500
I am assuming you =are saying that 250 of the debt defaulted and 250 was realized and no =longer debt on the first day of the second year.
If no defaults in =second year, mortality rate in 2nd year =3D 0/1000
-----Original Message-----
From: Denis Dubois =[SMTP:Denis.Dubois@axa-canada.com]
Sent: Monday, April 19, 1999 11:12 AM
To: studygroup10@lists.casact.org
Subject: = Altman
Hello people,
I'm questionning myslef on the =data used by Altman to calculate his
mortality rate. I think =that he is using the value of defaulting debt
in the numerator (vs amount =lost on defaulting debt) but it seams that
NEAS think that its the =opposite. Here's a simple numerical example to
illustrate this =situation:
2 bonds; par #1=3D1000; =par #2=3D500; #2 default in 1st year with a
residual value of 250$;
Does the mortality =rate=3D1/3(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