Download This PaperBond Prices, Default Probabilities and Risk Premiums
11 Pages Posted: 11 Nov 2012
Date Written: March 9, 2005
Abstract
A feature of credit markets is the large difference between probabilities of default calculated from historical data and probabilities of default implied from bond prices (or from credit default swaps). This paper illustrates and discusses the reasons for the difference between historical and risk neutral probabilities.
Keywords: risk-neutral default probabilities, historical default probabilities, credit default swaps
Suggested Citation: Suggested Citation
John C. Hull
University of Toronto - Rotman School of Management ( email )
105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
(416) 978-8615 (Phone)
416-971-3048 (Fax)
Alan White
University of Toronto - Rotman School of Management ( email )
105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-978-3689 (Phone)
416-971-3048 (Fax)
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