Friday, March 4, 2011

04/03/2011: Default probabilities

Some people were asking me recently to give an estimate of the sovereign default probabilities for Ireland based on bonds yields. Here are two tables providing an answer -
  1. The first table covers yesterday close yields on generic IRL bonds by maturity
  2. The second estimates probability of default, using, as risk-free rates German yields on comparable paper

Basically, there is a 90% chance of a default (20% haircut) within 10 years and 15% chance of such an event within the year.

The estimates are very much approximate as we use only yields.
Post a Comment