The first period probability of default for a B-rated bond is 2%.In second period the probability of default is the probability of surviving year 1 and defaulting in year 2.
The year 2 probability of default = (0.03 * 0.00) + (0.90 * 0.02) + (0.05*0.14) = 2.5%.
Therefore, the two-period cumulative probability of default = 2% + 2.5% = 4.5%.
发表于 2009-6-13 11:11
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