Takeyama, Azusa; Constantinou, Nick; Vinogradov, Dmitri - Institute for Monetary and Economic Studies, Bank of Japan - 2012
This paper develops a framework to estimate the probability of default (PD) implied in listed stock options. The underlying option pricing model measures PD as the intensity of a jump diffusion process, in which the underlying stock price jumps to zero at default. We adopt a two-stage...