# 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, ...
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### 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 ...
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### 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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### Bond prices and probability of default

what happens if such probability differs from those implied by CDS spreads? I would imagine there is an arbitrage opportunity there but donâ€™t know what it would look like in practice Bonds vs. CDS is ...
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### Generalized Linear Mixed Model (GLMM) for the probability of default of corporates

Merton models and their progeny are likely the route you want to take. There's a ton of research out there on this, model selection largely depends on the use for your product (eg, loan or firm risk ...
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### Square root specification of parameters in factor models

The main motivation for the use of Vasicek single factor framework, is that the model produce analytically tractable formulas that are easy to implement and does not require any extensive numerical ...
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