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Department of Economics, Lund University Working Papers, Department of Economics, Lund University

No 2005:7:
Default Probabilities According to the Bond Market

Hans Byström () and Oh Kang Kwon ()

Abstract: In this paper we describe a simple way of analytically computing entire ìterm structures of default probabilities using information embedded in the corporate bond market data. This market-based approach of estimating the creditworthiness of firms gives probabilities of default at various maturities, and has the advantage over traditional credit ratings in that it is dynamic and forward looking.

Keywords: bond market; default probability term structure; (follow links to similar papers)

JEL-Codes: C20; G33; (follow links to similar papers)

13 pages, January 26, 2005

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This paper is published as:
Byström, Hans and Oh Kang Kwon, (2005), 'Default Probabilities According to the Bond Market', Corporate Finance Review, Vol. 9, No. 5, pages 15-26



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