Jarrow, Robert A.
[Verfasser:in]
;
Janosi, Tibor
[Sonstige Person, Familie und Körperschaft];
Yildirim, Yildiray
[Sonstige Person, Familie und Körperschaft]
Estimating Default Probabilities Implicit in Equity Prices
Anmerkungen:
In: Journal of Investment Management, Vol. 1, No 1, First Quarter 2003
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments November 12, 2012 erstellt
Beschreibung:
This paper uses a reduced form credit risk model to estimate default probabilities implicit in equity prices. For a cross-section of firms, a time-series regression of monthly equity returns is estimated. We show that it is feasible to infer the firm's probability of default implicit in equity returns. However, the existence of price bubbles and the difficulty in modeling equity price risk premium confound the estimation of these default probabilities, generating potentially biased estimates with large standard errors. Comparing these default intensities with those obtained from historical data or implicitly from debt prices confirms this result