Tag: "Probability of insolvency"
The Probability of Bankruptcy
A good metric should have a low probability of rejecting a true hypothesis of bankruptcy (false positive) and a high probability of rejecting a false hypothesis of bankruptcy (false negative).
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Predicting Bankruptcy
The Z-score is not intended to predict when a firm will file a formal declaration of bankruptcy in a district court. It is instead a measure of how closely a firm resembles other firms that have filed for bankruptcy.
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The Risk of Bankruptcy
There are several models in use for predicting bankruptcy and we have in our balance simulation model implemented two; Altman’s Z-score model and the risk index Z developed by Hannan and Hanweck.
