Calculation:

First derive parameters:

1. Returns and volatility of equity using historical data (1 year)

2. Market value of equity = no. of stocks ∗ stock price

3. Risk-free interest rate

4. Time liabilities (will mature in 1 year)

5. Liabilities shot-term + one half of long-term

Then:

1. Simultaneously solve two nonlinear equations (in R),→ get value and volatility of the asset

2. Calculate Distance-to-Default and probability to default

Now, given these requirements using what variables from parameters 1-5 above in the Indian banks context can we get distance-to-default?