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1answer
56 views

Actually benefiting from logistic regression to estimate probability of default

Does anyone know any events where using logistic regression to estimate probability of default has led to a bank, financial institution, government or anything really to benefit in practice? I see a ...
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1answer
31 views

What is Margin of Conservatism

In modelling loss given default,(LGD), we often encounter the term Margin of Conservatism. What is it in layman's terms? I am not able to find a wikipedia page on this.
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1answer
41 views

Term structure of default probabilities without market data

With the forthcoming new regulations, IFRS9, financial institutions will be required to model life time expected credit losses. Consequently, it is necessary to model the term structure of default ...
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2answers
47 views

Using Financial Ratios to get credit rating or PD

Hello I'm looking for papers, aside from ones that use CDS spreads, about credit rating development or estimating default probability based on financial ratios that also include methodology and maybe ...
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0answers
33 views

How to calculate Probability of Default from Survival Probability

I would calculate Probability of Default from Survival Probability. I want to know how they are related. This is how I think they are related: ...
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2answers
53 views

Deriving credit spreads or migration matrices from prob of default

How do I derive credit migration/transition matrices or spreads from default probability? May you please provide references, or do you know what type of articles or authors to find?
4
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0answers
193 views

A model to stochastic hazard rate and CDS spread term structure

I'm interested in the term structure of CDS spread. It's known that the Market CDS rate (fair CDS spread or T-maturity spread) of a CDS contract initiated at $s$, maturity $T$ and recovery function ...
4
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2answers
319 views

CDS Spread and Par Bond Yield Spread

It is claimed that the credit default swap (CDS) spread should approximate the risky par bond yield or coupon rate spread from the riskless bond on the same entity. This comes about when we assume ...
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votes
3answers
99 views

Interpolating probabilities of default

I have a table of cumulative probabilities of default of industrial bonds, in time and credit rating. It is similar to S&P whitepaper here. Basically, it looks like this (sample numbers): ...
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2answers
137 views

Probability of Hyperinflation as a function of Probability of Soverign Default

I'm looking for some academic research on modeling risk of hyperinflation. Specifically, I'm interested in modeling the probability of hyperinflation over some time interval (e.g., probability of ...
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3answers
267 views

CDS Spreads and Equity Volatility

Why does CDS spreads track the implied volatility on equities? What is the fundamental relationship that would keep the two inline from deviating too far from each other? My speculation: Could it be ...
2
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3answers
170 views

Implied Probability of Default from Bond Prices

I am trying to build out a probability of default model for a bond. Given the current price of a bond and the current risk free rate, I am trying to calculate the probability of default. So assume a ...
3
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2answers
1k views

How to use Merton model to calculate default probability with monthly stock prices?

I want to calculate the estimated default probability with only given data the monthly returns for the last 20 years, the risk-free rate ($R_f$), equity value (EV) and the face value of debt ($D$). My ...