IMF paper explores measures of default probability
An International Monetary Fund paper, published on Friday, examines probabilities of default and market price of risk in a distressed economy.
Raphael Espinoza and Miguel Segoviano Basurto, the paper's authors, propose a method to estimate the market price of risk and probability of default under stress by applying credit default swap (CDS) markets assessment of risk in US banks during the subprime crisis.
Espinoza and Segoviano Basurto show the market price of risk under distress has to be
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