You recently started a new job, and you'll be responsible for examining probabilities of default. Your...

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You recently started a new job, and you'll be responsible for examining probabilities of default. Your department has already compiled a database of default information that you will use to estimate future bond defaults using a structural default model similar to Moody's KMV. 2(1) When you examine the sample below from the database of bond issuers you see that there are problems with the way data has been recorded. What suggestions would you make to clean up the database? Year Company 2012 SafeBet 2013 SafeBet 2014 SafeBet 2015 SafeBet 2012 EnergyPlus 2013 EnergyPlus 2014 EnergyPlus EnergyPlus GammaDelta 2013 GammaDelta 2014 GammaDelta 2015 GammaDelta 2015 2012 Industry Financial Services Financial Services Financial Services Financial Services Utilities Utilities Utilities Utilities Asset Value Beg. of Year Volatility Defaults Notes (millions) (millions) $20m $1,050 $900 $950 $1,100 $2,400 $2,600 $2,700 $3,000 $50 $70 $170 $500 No No $40 $30 No 15% No 17% No 15% No $40 No 5% Yes 5% 2 7% 2% No No default data Equity volatility Equity volatility Equity volatility Equity volatility You recently started a new job, and you'll be responsible for examining probabilities of default. Your department has already compiled a database of default information that you will use to estimate future bond defaults using a structural default model similar to Moody's KMV. 2(1) When you examine the sample below from the database of bond issuers you see that there are problems with the way data has been recorded. What suggestions would you make to clean up the database? Year Company 2012 SafeBet 2013 SafeBet 2014 SafeBet 2015 SafeBet 2012 EnergyPlus 2013 EnergyPlus 2014 EnergyPlus EnergyPlus GammaDelta 2013 GammaDelta 2014 GammaDelta 2015 GammaDelta 2015 2012 Industry Financial Services Financial Services Financial Services Financial Services Utilities Utilities Utilities Utilities Asset Value Beg. of Year Volatility Defaults Notes (millions) (millions) $20m $1,050 $900 $950 $1,100 $2,400 $2,600 $2,700 $3,000 $50 $70 $170 $500 No No $40 $30 No 15% No 17% No 15% No $40 No 5% Yes 5% 2 7% 2% No No default data Equity volatility Equity volatility Equity volatility Equity volatility

Answer rating: 100% (QA)

Based on the provided sample from the bond issuers database there are several suggestions to clean u... View the full answer