Estimate unconditional and conditional default probability, Financial Accounting

XYZ Inc. whose stock is currently valued at $125/share with an implied volatility of 40% has debt of $80/share.

a. Assuming a global recovery rate of 50% and a standard deviation of recovery rate of 30%, estimate its 4 and 5 year default probability.

b. Estimate the unconditional and conditional default probability in year 5.

c. Based on the market CDS quotes, the implied 5 year default probability is 5%. Determine the correct Global Recovery Rate that would make XYZ 5 year default probability equal to 5% (Keep the standard deviation of recovery rate the same)

Posted Date: 3/25/2013 4:17:26 AM | Location : United States







Related Discussions:- Estimate unconditional and conditional default probability, Assignment Help, Ask Question on Estimate unconditional and conditional default probability, Get Answer, Expert's Help, Estimate unconditional and conditional default probability Discussions

Write discussion on Estimate unconditional and conditional default probability
Your posts are moderated
Related Questions
In May of 2010 a calendar year taxpayer, placed in service $2,137,000 of USED 15-year recovery property. The taxpayer has taxable income of $1,175,000 before the cost recover

In May of 2010, a business placed in service $35,000 of property eligible for limited expensing under ยง179. Line 13 of Form 4562 for 2009 was $15,000. Net income before cost recove

natasha kingrey to calculate present value of salary differential for completing mba

I have an assignment due in four hours. Is it possible to get an inquiry if at least half of it can be done within that time?


Dealing with changes in the trust Profits or losses on disposal of investments should be treated as belonging to that part of the fund out of which they accrued. If not app

The conflicting interests of users We have seen above that every user group looks at a business from a different perspective and has its own individual interests. This means th

Q. What do you mean by Re - organization? Reorganization - This is a change in businesses capital arrangements. If for a CORPORATION there are 7 statutory options for reorganiz

Olivia has received a $15 gift certificate that is redeemable only for roasted peanuts. Bags of roasted peanuts come in two sizes, regular and jumbo. A regular bag contains 30 pean

Q. Calculation of internal rate of return? The company is accurate in its belief that NPV measures the potential increase in company value of an investment project since theore