How to use Merton model calculate firm value volatility?

[ajsa]

Hi David,

Could you explain how to use Merton model calculate firm value volatility? (it is part of an AIM)

thanks.

 

[David Harper CFA FRM]

Hi asja,

actually i could (maybe i will try to make a screencast on this next week)...but in the video tutorial I said this was a mistake in the AIM, and I noted in the "Clarifications" document. GARP cannot possibly mean this ... see Stulz technical box 18.1 for a sense ... it's not beyond the pale difficult really but clearly beyond the scope of FRM...David