You see the following statement in a popular business periodical: The credit-default swap spread on Greece is

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You see the following statement in a popular business periodical: “The credit-default swap spread on Greece is now 1,340 basis points. This means that there is a 68% probability that within five years Greece will default.”

a. How is the “68% probability of default” obtained?

b. What assumptions must be made to use this probability estimate of default?

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Bond Markets Analysis And Strategies

ISBN: 9780253337535

10th Edition

Authors: Frank J. Fabozzi, Francesco A. Fabozzi

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Question Posted: Jan 21, 2024 12:07 PM

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You see the following statement in a popular business periodical: The credit-default swap spread on Greece is

Question:

Step by Step Answer:

a The probability of default PD is often inferred from the credit default swap CDS spread using some form of a credit risk model For example a commonl...View the full answer

Bond Markets Analysis And Strategies

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