Implied Default Probabilities and Losses Given Default from Option Prices*
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| Názov: | Implied Default Probabilities and Losses Given Default from Option Prices* |
|---|---|
| Autori: | ALLAUDEEN S/O S HAMEED, Conrad, Jennifer, Dittmar, Robert |
| Prispievatelia: | FINANCE |
| Zdroj: | Journal of Financial Econometrics. 18:629-652 |
| Informácie o vydavateľovi: | Oxford University Press (OUP), 2020. |
| Rok vydania: | 2020 |
| Predmety: | 2. Zero hunger, 0502 economics and business, 05 social sciences, 8. Economic growth, 1. No poverty |
| Popis: | We propose a novel method of estimating default probabilities using equity options data. The resulting default probabilities are highly correlated with estimates of default probabilities extracted from CDS spreads, which assume constant losses given default. Additionally, the option-implied default probabilities are higher in bad economic times and for firms with poorer credit ratings and financial positions. A simple inferred measure of loss given default is related to underlying business conditions, and varies across sectors; the time series properties of this measure are similar after controlling for liquidity effects. |
| Druh dokumentu: | Article |
| Jazyk: | English |
| ISSN: | 1479-8417 1479-8409 |
| DOI: | 10.1093/jjfinec/nbaa017 |
| Prístupová URL adresa: | https://academic.oup.com/jfec/article/18/3/629/5909333 |
| Rights: | OUP Standard Publication Reuse |
| Prístupové číslo: | edsair.doi.dedup.....ee447dc6b6e6f711fd88ab6f4ec1fe0e |
| Databáza: | OpenAIRE |
Nájsť tento článok vo Web of Science | Abstrakt: | We propose a novel method of estimating default probabilities using equity options data. The resulting default probabilities are highly correlated with estimates of default probabilities extracted from CDS spreads, which assume constant losses given default. Additionally, the option-implied default probabilities are higher in bad economic times and for firms with poorer credit ratings and financial positions. A simple inferred measure of loss given default is related to underlying business conditions, and varies across sectors; the time series properties of this measure are similar after controlling for liquidity effects. |
|---|---|
| ISSN: | 14798417 14798409 |
| DOI: | 10.1093/jjfinec/nbaa017 |