If we are given two spot rate term structures (spot rates for Treasuries and for risky corporate bond), the question is, what is the 2-year cumulative probability of default (PD)? We take THREE STEPS: 1. Compute 1-year forward rates; 2. Compute marginal probability of defaults; 3. Compute the 2-year cumulative probability of default
very intuitive presentation...
roycons 8 months ago
Actually i'm preparing a public selection as a financial statistician at the bank of italy.
I find this exercise very helpful indeed! Thanks a lot bionic turtle!
rediromasuperstar 9 months ago