Patent ID: 8805735

Claim:
A method of determining a model default swap spread for a firm comprising: determining, by a computer system, a calibration group of the firm, wherein the calibration group comprises other firms having a region, a sector and a coarse quality related to the firm, wherein the computer system comprises at least one processor; setting, by the computer system, firm leverage variables μ L , σ L 2 and max L through combining observable data with a value of at least one model parameter, wherein μ L is the expected firm leverage, σ L 2 is the variance of the firm leverage, and max L is the largest possible value for firm leverage L; calibrating, by the computer system, variables μ L , σ L 2 , max L , and firm value variables V and σ V based on the calibration group; calculating, by the computer system, the model default swap spread based on at least one of calibration variables μ L , σ L 2 , max L , V and σ V ; and storing the model default swap spread in a database of the computer system.