Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
1016843 | IIMB Management Review | 2011 | 11 Pages |
Abstract
Motivated by the credit crisis, this paper investigates links between risk-neutral probabilities of default implied by markets (e.g. from yield spreads) and their actual counterparts (e.g. from ratings). It discusses differences between the two and clarifies underlying economic intuition using simple representations of credit risk pricing. Observed large differences across bonds in the ratio of the two probabilities are shown to imply that apparently safer securities can be more sensitive to news.
Related Topics
Social Sciences and Humanities
Business, Management and Accounting
Business and International Management
Authors
Shashidhar Murthy,