Câmara, António; Popova, Ivilina; Simkins, Betty - In: Journal of Banking & Finance 36 (2012) 3, pp. 717-732
This article presents a modification of Merton’s (1976) ruin option pricing model to estimate the implied probability of default from stock and option market prices. To test the model, we analyze all global financial firms with traded options in the US and focus on the subprime mortgage crisis...