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Default Probabilities According to the Bond Market

Author

Listed:
  • Byström , Hans

    () (Department of Economics, Lund University)

  • Kwon, Oh Kang

    () (Discipline of Finance,University of Sydney.)

Abstract

In this paper we describe a simple way of analytically computing entire ìterm structures of default probabilities using information embedded in the corporate bond market data. This market-based approach of estimating the creditworthiness of firms gives probabilities of default at various maturities, and has the advantage over traditional credit ratings in that it is dynamic and forward looking.

Suggested Citation

  • Byström , Hans & Kwon, Oh Kang, 2005. "Default Probabilities According to the Bond Market," Working Papers 2005:7, Lund University, Department of Economics.
  • Handle: RePEc:hhs:lunewp:2005_007
    as

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    More about this item

    Keywords

    bond market; default probability term structure;

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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