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Bank of Canada RSS Feedsen2024-03-28T10:21:57+00:00A Simple Method for Extracting the Probability of Default from American Put Option Prices
https://www.bankofcanada.ca/2020/04/staff-working-paper-2020-15/
A put option is a financial contract that gives the holder the right to sell an asset at a specific price by (or at) a specific date. A put option can therefore provide its holder insurance against a large drop in the stock price. This makes the prices of put options an ideal source of information for a market-based measure of the probability of a firm’s default.2020-04-20T13:31:12+00:00enA Simple Method for Extracting the Probability of Default from American Put Option Prices2020-04-20Asset pricingFinancial marketsMarket structure and pricingStaff Working Paper 2020-15https://www.bankofcanada.ca/wp-content/uploads/2020/04/swp2020-15.pdfA Simple Method for Extracting the Probability of Default from American Put Option PricesBo Young ChangGreg OrosiApril 2020GG1G13G3G33Equity Option-Implied Probability of Default and Equity Recovery Rate
https://www.bankofcanada.ca/2016/12/staff-working-paper-2016-58/
There is a close link between prices of equity options and the default probability of a firm. We show that in the presence of positive expected equity recovery, standard methods that assume zero equity recovery at default misestimate the option-implied default probability.2016-12-15T12:23:13+00:00enEquity Option-Implied Probability of Default and Equity Recovery Rate2016-12-15Asset pricingFinancial marketsMarket structure and pricingStaff Working Paper 2016-58https://www.bankofcanada.ca/wp-content/uploads/2016/12/swp2016-58.pdfEquity Option-Implied Probability of Default and Equity Recovery RateBo Young ChangGreg OrosiDecember 2016GG1G13G3G33