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# Questions tagged [default-risk]

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42 views

### Expected Yield to Maturity & Default Risk Premium

For a corporate bond, which natuarally has a default risk, the expected yield to maturity (EYTM) is defined as the probability-weighted average of all possible yields. Hence, for a 10-year zero-...
48 views

### Extracting Risk Neutral Default Probabilities using Option Adjusted Bond Prices

I am currently in a project trying to quantify default risk premia for US Corporate Bonds. The data I have consists of bond prices, and other information (i.e. YTM, OAS, Effective Duration, Maturity ...
41 views

### Annualized actual probability

I have a dataset of bank loans over different periods. Let's say that most of the loans have a horizon over 5,10,15 years. I obtain the actual default rate over these different type of loans. I would ...
110 views

### Calculating the long run average default rate when the portfolio changes during the year

The Basel rules prescribe to calculate a long run average default rate (LADR). It is stated that his rate should be calculated as the average of yearly default rates. A first idea what be: look at ...
83 views

### LGD performing model - LGD estimate vs LGD observed

LGD (Loss Given Default) performing model is developed on through the cycle sample which consists of loans in default. What I want is to compare LGD estimate and LGD observed (realized). LGD observed ...
66 views

### How to determine the default probability of a county in a bond that is not in its native currency?

Disclaimer: This post is cross posted in here also. Consider the following case: Country P uses the currency Euro and gives p percent interest on a one year bond issued in Euro. Country Q uses the ...
71 views

### Objective measure of highly leveraged firms using Debt-to-EBITDA ratio

I am looking for some kind of guidance what is generally considered a high or low ratio of Debt-to-Earnings before interest, tax, depreciations and amortisations (EBITDA). In a recent article by The ...
1k views

### From quoted spread and coupon to upfront, and vice versa : which recovery rates and when?

Echoing the following question : Markit recovery rates : assumed vs real I would like to have a confirmation on my understanding on the matter. Markit provides data for CDS, namely, for tenors ...
111 views

### Is it possible to sell protection on own asset with CDS?

Is it possible for a company to sell protection on their own assets or own country bonds by CDS? The company can buy protection on those assets, but how about selling? I suppose it can not sell. Is ...
299 views

This is John Hull's book Options, Futures and Other Derivatives 9th Page 549 The process of calculating the ...
329 views

### CDS Vs Credit Risk premium over risk free

Credit default swap is the premium you pay to protect against a credit default from your borrower. Would it be equal to the credit premium over risk free i.e. bond yield - risk free of comparable ...
865 views

### How to price a credit-risky zero-coupon bond?

I recently received the following exercise: Construct a $n=10$-period binomial model for the short-rate, $r_{i,j}$. The lattice parameters are: $r_{0,0}=5\%$, $u=1.1$, $d=0.9$ and;...
372 views

### Can CreditGrades CDS Pricing Model be used for financial firms?

For Canadian banks, the CDS market is very illiquid and inactively traded. I want to get an estimate for the spread for a one year CDS on the Bank of Montreal. I was going to estimate this using the ...
2k 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 ...
905 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 ...
434 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?