Working Paper CNR-IRCrES 7/2026
Pubblicato il working paper “Una versione logit di Merton-Vasicek” a cura di Franco Varetto.
This paper develops a discrete-time, intensity-based version of the Merton–Vasicek framework, in which the stochastic variable is the survival logit rather than the probit function adopted in the original Merton model.
The main contribution of the proposed framework is the replacement of asset correlation with the correlation between survival logits. This measure is more intuitive, easier to interpret, and can be estimated for the entire population of firms covered by banks’ internal rating systems. From a methodological standpoint, the model requires a revised definition of the probability of default (PD), which differs from its conventional interpretation, together with the determination of the optimal default threshold.
The main contribution of the proposed framework is the replacement of asset correlation with the correlation between survival logits. This measure is more intuitive, easier to interpret, and can be estimated for the entire population of firms covered by banks’ internal rating systems. From a methodological standpoint, the model requires a revised definition of the probability of default (PD), which differs from its conventional interpretation, together with the determination of the optimal default threshold.
