Explain the difference between the default probabilities calculated from historical default experience and those calculated from credit

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Explain the difference between the default probabilities calculated from historical default experience and those calculated from credit spreads.

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Risk Management And Financial Institutions

ISBN: 9781119932482

6th Edition

Authors: John C Hull

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Question Posted: Mar 08, 2024 01:00 AM

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Should researchers use default probabilities calculated from historical data or from credit spreads for (a) calculating credit value at risk and (b) adjusting the price of a derivative for default?
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Explain the difference between the default probabilities calculated from historical default experience and those calculated from credit

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Riskneutral default probabilities are backed out from credi...View the full answer

Risk Management And Financial Institutions

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