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test_FinModelMerton.py
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###############################################################################
# Copyright (C) 2018, 2019, 2020 Dominic O'Kane
###############################################################################
from financepy.models.merton_firm_mkt import MertonFirmMkt
from financepy.models.merton_firm import MertonFirm
def test_merton():
# Input Equity values and equity vols
equity_value = [2.6406, 2.6817, 3.977, 2.947, 2.528]
equity_vol = [0.7103, 0.3929, 0.3121, 0.4595, 0.6181]
bond_face = [4.0, 3.5, 3.5, 3.2, 4.0]
risk_free_rate = [0.05, 0.05, 0.05, 0.05, 0.05]
asset_growth_rate = [0.0306, 0.03, 0.031, 0.0302, 0.0305]
years_to_maturity = 1.0 # np.linspace(0.1, 10, 100)
model = MertonFirmMkt(equity_value,
bond_face,
years_to_maturity,
risk_free_rate,
asset_growth_rate,
equity_vol)
assert [round(x, 4) for x in model.debt_value()] == [
3.7804, 3.3292, 3.3293, 3.0436, 3.7951]
assert [round(x*1e4, 4) for x in model.credit_spread()
] == [64.6893, 0.2289, .0009, 1.2398, 25.7203]
assert [round(x, 4) for x in model.leverage()] == [
1.6052, 1.7174, 2.0875, 1.8720, 1.5808]
assert [round(x*1e2, 4) for x in model.prob_default()
] == [6.3791, .0768, 0.0005, 0.2622, 3.4408]
asset_value = model._A
asset_vol = model._vA
model = MertonFirm(asset_value,
bond_face,
years_to_maturity,
risk_free_rate,
asset_growth_rate,
asset_vol)
assert [round(x, 4) for x in model.debt_value()] == [
3.7804, 3.3292, 3.3293, 3.0436, 3.7951]
assert [round(x*1e4, 4) for x in model.credit_spread()
] == [64.6893, 0.2289, 0.0009, 1.2398, 25.7203]
assert [round(x, 4) for x in model.leverage()] == [
1.6052, 1.7174, 2.0875, 1.8720, 1.5808]
assert [round(x*1e2, 4) for x in model.prob_default()
] == [6.3791, 0.0768, 0.0005, 0.2622, 3.4408]
assert [round(x, 4) for x in model.dist_default()] == [
1.5237, 3.1679, 4.4298, 2.7916, 1.8196]
asset_value = 140.0
bond_face = 100.0
years_to_maturity = 1.0
risk_free_rate = 0.05
asset_growth_rate = 0.05
asset_vol = 0.20
model = MertonFirm(asset_value,
bond_face,
years_to_maturity,
risk_free_rate,
asset_growth_rate,
asset_vol)
assert round(model.debt_value(), 4) == 94.8894
assert round(model.credit_spread()*10000, 4) == 24.5829
assert model.leverage() == 1.4
assert round(model.prob_default(), 4) == 0.0334
assert round(model.dist_default(), 4) == 1.8324