00000nam 2200000za 4500 9.830344 CaOODSP 20221107145516 cr ||||||||||| 170111s2016 oncd ob f000 0 eng d CaOODSP eng eng fre n-cn--- FB3-5/2016-58E-PDF Chang, Bo-Young. Equity option-implied probability of default and equity recovery rate [electronic resource] / by Bo Young Chang and Greg Orosi. [Ottawa] : Bank of Canada, c2016. ii, 21 p. : ill. Staff Working Paper, 1701-9397 ; 2016-58 "December 2016." Includes bibliographical references (p. 14-16). "There is a close link between prices of equity options and the default probability of a firm. We show that in the presence of positive expected equity recovery, standard methods that assume zero equity recovery at default misestimate the option-implied default probability. We introduce a simple method to detect stocks with positive expected equity recovery by examining option prices and propose a method to extract the default probability from option prices that allows for positive equity recovery. We demonstrate possible applications of our methodology with examples that include large financial institutions in the United States during the 2007–09 subprime crisis"--Abstract, p. ii. Includes abstract in French. gccst Assets gccst Capital markets gccst Pricing Orosi, Greg. Bank of Canada. Staff working paper (Bank of Canada) 1701-9397 ; 2016-58 (CaOODSP)9.806221 PDF 463 KB https://publications.gc.ca/collections/collection_2017/banque-bank-canada/FB3-5-2016-58-eng.pdf