Showing posts with label Irish debt crisis. Show all posts
Showing posts with label Irish debt crisis. Show all posts
Saturday, March 12, 2011
12/03/2011: Updated probabilities of default
Weekly close data-based estimates of the probability of default on Irish sovereign bonds, based on yields. Note: these are mathematical estimates based on what the markets price in. All complaints should be addressed to the markets.
Marked in black bold are probabilities in excess of 40% (or statistically indistinguishable to 40%) - the benchmark that in the CDS markets considered to be crisis levels of probability of default.
Most of the risk is now concentrated, based on spreads in 3-year horizon, while in absolute terms the markets perceive risk peaking at or before 5 year horizon.
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 -
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.
- The first table covers yesterday close yields on generic IRL bonds by maturity
- 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.
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