The QuantWolf Guide to Calculating Bond Default Probabilities
This report shows how to extract the default probability from the price or yield of a bond. It is not hard to do. All you need is a little elementary probability theory and some simple logic. Armed with the market based estimate of default probability, and your own model based estimate, you can decide if a bond is a good investment.
Included in this report is:
- What kind of simple betting game is a lot like buying a zero coupon bond.
- Exact formula for default probability of zero coupon bonds.
- Simple approximation formulas for the default probability of zero coupon bonds using either discount rate or yield.
- How to numerically solve for the default probability of the more complicated case of a coupon bond.
- Formulas for the probabilities of two correlated bonds both defaulting, one or the other defaulting, or neither defaulting.
- Functions for calculating default probability given price, or price given default probability, written in Open Office Basic which should be compatible with Microsoft's Visual Basic, and usable as spreadsheet macros.
This 24 page report in pdf format is only $29.95. Just click below now:
| Paypal |
Free with your purchase of the report, is an accompanying Open Office spreadsheet, providing an example of how to use the included functions.
This report is risk free. If you're not completely satisfied with it in the next 60 days, let us know, and we will refund your money, and you get to keep the report and spreadsheet.
To order this report on a risk-free basis, click below now:
| Paypal |
About the authors: Stefan Hollos and Richard Hollos are physicists by training, and have in recent years been working on problems in quantitative finance. The website for their quantitative finance related work is QuantWolf.com. They are interested in anything related to the calculation of probabilities (odds).