Implementation of selected structural models of credit risk in practice

In the last decade, particularly in connection with the development of credit derivatives, an attention paid to credit risk modelling has increased. Credit derivatives allow trading with credit risk. Therefore, there is a need to quantify it. Currently there are two groups of models aimed to estimate the credit risk, structural and reduced models. The basis of the structural models is the linking of a credit event with corporate fundamentals, for example assets or capital structure. This linking is based on a mutual dependence of, e.g. probability of default of a company or term structure of credit spreads on the value of these fundamentals. In the paper only selected structural models will be characterized and analysed. Then the way, in which the market price of corporate assets can be calculated, will be presented. Finally is mentioned very successfully used KMV model, which is inspired by the model of Black-Scholes-Merton.