3
votes
1answer
94 views

Summary statistic for the average probability of default?

I have the following scenario: Let $X_i$ denote the event where some institution $i$ 'defaults' (don't worry about the exact definition of a default here, it is not relevant to the question at hand). ...
2
votes
0answers
104 views

default probability

Suppose the hazard rate is $\lambda$ the default probability density function follow exponential $f(t) = \lambda e^{-\lambda t}$ and cumulative probability function is $F(t) = 1 - e^{-\lambda t}$ ...
8
votes
1answer
3k views

How to estimate probability of default from bond prices?

How do you use bond prices/yields to infer probabilities of default? I would think of it as follows: Create a relationship between default free (e.g., Germany) and defaultable (e.g., Greece) bond ...