Strategy has published its own credit risk model for its debt and preferred securities. According to Strategy Executive Chairman Michael Saylor, the tool allows investors to evaluate risk by adjusting Bitcoin’s price, volatility, and expected return.
How the Model Works
The model is built around three variables: BTC price, its volatility, and its expected annual return. By changing these inputs, investors can estimate the expected credit risk, credit spread, the number of years Bitcoin reserves could cover dividend payments, and the minimum expected return.
“This approach allows investors to independently assess the value of Strategy’s securities because Bitcoin is the primary driver of credit risk, and it is an asset with transparent market pricing,” Saylor said.
Example Calculation
As an example, Strategy used a scenario with Bitcoin priced at approximately $62,700, 40% volatility, and an expected annual return of 30%. Under those assumptions, the model estimates the company’s Bitcoin reserves at nearly $53 B, a dividend coverage period of 30 years, and the minimum expected annual return at approximately 3.3%.
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