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3
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1answer
244 views

What are the main flaws behind Ross Recovery Theorem?

Stephen Ross’ new paper claims that it is possible to separate risk aversions and historical probabilities if the Stochastic Discount Factor is transition independent using Perron-Frobenius Theorem. ...
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0answers
217 views

Obtaining the default probability and recovery rate for each credit rating?

I have the following questions for obtaining the credit rating: Given that I have cumulative default probability of each credit rating from Global Corporate Average Cumulative Default Rates ...
1
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0answers
477 views

Question about Merton model to estimate default probability and recovery rate of the company

I recently come across Merton's model to estimate the default probability and recovery rate of the company. Here is the inputs ...
3
votes
2answers
250 views

Question about the rationale of applying certain recovery rate by ISDA

According to ISDA standard (also here), the recovery rate for senior unsecured is 40%, that of subordinate is 20%, and emerging markets is 25% (both senior and subordinate). I wonder the rationale of ...
2
votes
1answer
217 views

Recovery rate in a structured bond

I need to model the recovery rate of a structured bond whose expected cash flows, if the issuer remains solvent, will be very low. For instance, assume that I need to estimate the recovery amount of a ...