Based on a structural model that assumes a normal distribution of firm value, the distance to default for firm 1 is DT D 1 2 Likewise, for firm 2, DT D 2 1 If the correlation of default between the two firms is 0 3, what is the probability of joint default

Question: Based on a structural model that assumes a normal distribution of firm value, the distance to default for firm 1 is DT D 1 =

Based on a structural model that assumes a normal distribution of firm value, the distance to default for firm 1 is DT D₁ = 2. Likewise, for firm 2, DT D₂ = 1. If the correlation of default between the two firms is 0.3, what is the probability of joint default?

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