标题: Default Risk Premium for a One-Period Debt Instrument, QM ba [打印本页] 作者: ftwcfa 时间: 2013-4-28 09:09 标题: Default Risk Premium for a One-Period Debt Instrument, QM ba
Hi everyone, I have a question concerning how the CFA book came to the calculations they did.
Reading 8, example 11, page 431.
In calculating the “third step”, finding the expected value of the bond per every 1$ invested.
Where does the ” [1-P(bond default)] ” part come from?
Thanks for the help!作者: karoliukas 时间: 2013-4-28 09:09
What is the full formula?作者: redskins44 时间: 2013-4-28 09:09
Calculate expected value of the bond (per $1 invested):
Bond value: $0 if bond defaults, $(1+R) if bond does not default
E(bond) = $0 x P(bond default) + $(1+R) x [1-P(bond default)]作者: Halawiz 时间: 2013-4-28 09:09
Now I get it, thanks! 作者: disiz64 时间: 2013-4-28 09:10
