Structural Models in Credit Risk Modeling

Credit Risk Modeling

  1. Abel Elizalde PhD

Published Online: 15 DEC 2012

DOI: 10.1002/9781118182635.efm0025

Encyclopedia of Financial Models

Encyclopedia of Financial Models

How to Cite

Elizalde, A. 2012. Structural Models in Credit Risk Modeling. Encyclopedia of Financial Models. .

Author Information

  1. Credit Derivatives Strategy, J.P. Morgan

Publication History

  1. Published Online: 15 DEC 2012


Structural models and reduced-form models are the two primary types of credit risk models that seek to statistically describe default processes. Structural models use the evolution of firms' structural variables, such as asset and debt values, to model the time of default. In contrast, reduced-form models do not consider structural variables in an explicit manner when modeling default processes; instead, they model default as an exogenously driven process. Structural models include first passage models, liquidity process models, and state dependent models.


  • Merton;
  • model;
  • structural models;
  • default correlations;
  • first passage models;
  • liquidation process models;
  • State dependent models;
  • default event;
  • liquidation