The impact of liquid droplets on solid surfaces at conditions inducing cavitation inside their volume has rarely been addressed in the literature. A review is conducted on relevant studies, aiming to highlight the differences from non-cavitating impact cases. Focus is placed on the numerical models suitable for the simulation of droplet impact at such conditions. Further insight is given from the development of a purpose-built compressible two-phase flow solver that incorporates a phase-change model suitable for cavitation formation and collapse; thermodynamic closure is based on a barotropic Equation of State (EoS) representing the density and speed of sound of the co-existing liquid, gas and vapour phases as well as liquid-vapour mixture. To overcome the known problem of spurious oscillations occurring at the phase boundaries due to the rapid change in the acoustic impedance, a new hybrid numerical flux discretization scheme is proposed, based on approximate Riemann solvers; this is found to offer numerical stability and has allowed for simulations of cavitation formation during drop impact to be presented for the first time. Following a thorough justification of the validity of the model assumptions adopted for the cases of interest, numerical simulations are firstly compared against the Riemann problem, for which the exact solution has been derived for two materials with the same velocity and pressure fields. The model is validated against the single experimental data set available in the literature for a 2-D planar drop impact case. The results are found in good agreement against these data that depict the evolution of both the shock wave generated upon impact and the rarefaction waves, which are also captured reasonably well. Moreover, the location of cavitation formation inside the drop and the areas of possible erosion sites that may develop on the solid surface, are also well captured by the model. Following model validation, numerical experiments have examined the effect of impact conditions on the process, utilizing both planar and 2-D axisymmetric simulations. It is found that the absence of air between the drop and the wall at the initial configuration can generate cavitation regimes closer to the wall surface, which significantly increase the pressures induced on the solid wall surface, even for much lower impact velocities. A summary highlighting the open questions still remaining on the subject is given at the end.