Updating the Option Implied Probability of Default Methodology

URN to cite this document:: urn:nbn:de:bvb:355-epub-223269
DOI to cite this document:: 10.5283/epub.22326

Vilsmeier, Johannes

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Date of publication of this fulltext: 13 Oct 2011 07:32

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Abstract

In this paper we ‘update’ the option implied probability of default (option iPoD) approach recently suggested in the literature. First, a numerically more stable objective function for the estimation of the risk neutral density is derived whose integrals can be solved analytically. Second, it is reasoned that the originally proposed approach for the estimation of the PoD has some serious ...