... There are also anumber of disadvantages.Many of the basic inputs to the KMV model ± the value of the ®rm, the volatility and the expected value of the rate of return on the ®rmÕs assets ±cannot ... conferenceorganized by the Bank of England and the Financial Services Authority, the Bank of Japan, the Federal Reserve Board of the United States, and the R.A. Jarrow, S.M. Turnbull / Journal of Banking ... can incorporate these correlationsinto the probability of default kD over the interval Y D. To describe the dependence of the probability of default on the state of the economy, weuse...