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Jul 27

Risk Neutral Default Probability

Posted by abiao at 09:42 | Code » VBA/Excel | Comments(0) | Reads(11778)
A spreadsheet that demonstrates risk-neutral default probabilities when pricing bonds with embedded options. We illustrate the Martingale pricing process under certain assumptions.
The user inputs the bond parameters and an assumed recovery rate for each bond.
The spreadsheet computes the default probability.
The accompanying spreadsheet illustrates in simple terms how the risk-neutral probabilities
are obtained.

wiki(risk neutral)

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