# Tag Info

### How to compute the implied probability of default from a CDS spread?

Risk-neutral default probability implied from CDS is approximately $P=1-e^\frac{-S * t}{1-R}$, where $S$ is the flat CDS spread and $R$ is the recovery rate. The CDS Spread can be solved using the ...

### How to compute the implied probability of default from a CDS spread?

I believe the answer can be further improved for all those being directed here by google after 3 years. A common way to model the default probability is by the hazard rate. As @Bob correctly mentions, ...
Accepted

### Interest rate implied probability of default

You can use the "credit triangle" which states that the (annualised) credit spread $S$ equals the annualised probability of default $p$ times the loss given default LGD which equals par minus the ...
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### Recovery Rates in CDS valuation

Apparently, you refer to this passage from Prof John C. Hull (11th edition, 2021): It's confusing because Hull is referring to the market conventions before the "Big Bang". This is no ...

### CVA - Where does the default probability (PD) come from?

"Debt issuer default risk" and "counterparty risk" are very similar. From Risk magazine: Counterparty Risk The risk that a counterparty to a transaction or contract will default (...
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### Debt seniority and probability of default

A CDS contract has a "reference entity" (obligor, bond issuer) and a "reference obligation" (the specific bond that needs to default, rather than a tier). Read https://www.isda.org/...
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### Calculating probability of default with no recovery

Let $\tau$ be the default time, $\lambda$ be the constant hazard rate, and $T=1.0$ be the bond maturity. The value of the defaultable zero-coupon bond is given by \begin{align*} D(0, T) &= e^{-rT}...
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### Pricing homogeneous Basket Default Swap

Let $\tau_{(1)} = \min(\tau_1, \ldots, \tau_K)$ be the first-to-default time. Moreover, for $1< m \le K$, let \begin{align*} \tau_{(m)} = \min\left(\tau_k: k=1, \ldots, K, \tau_{k} > \tau_{(m-1)}...
Based on your definition, they are certainly not the same. Generally, the marginal default probability is the probability that the default happens in a given time period, such as $[t, t+\Delta]$, that ...