riskaware - Back Testing & Validation

The methodology of the model was successfully tested on several credits on the European leverage loan market, where fundamental values of credits calculated by the model were in line with market prices.

To demonstrate the edge of the model two credits from the European leverage loan market were compared. Using macroeconomic assumptions prevailing in mid-2007, the model showed that fair value for Debt “A” was 25% higher than Debt “B” in 2007. The chart below shows the price development of the two assets between 2007-2009.

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