Empirical Evaluation of Hybrid Defaultable Bond Pricing ... - risklab
Empirical Evaluation of Hybrid Defaultable Bond Pricing ... - risklab
Empirical Evaluation of Hybrid Defaultable Bond Pricing ... - risklab
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Schmid, Zagst 2000 Schmid, Zagst 2004<br />
Bakshi, Madan, Zhang 2001 Default Rate<br />
0,4<br />
Uncertainty Index / Default Rate<br />
0,3<br />
0,2<br />
0,1<br />
0<br />
-0,1<br />
08.10.1993<br />
07.07.1995<br />
04.04.1997<br />
Date<br />
01.01.1999<br />
29.09.2000<br />
Figure 10: Historical average default probabilities <strong>of</strong> rating category BBB (from<br />
Standard and Poor’s), mean reversion level <strong>of</strong> process s in the original model <strong>of</strong><br />
Schmid and Zagst, mean reversion level (θ s − b sw w(t)+b su u(t))/a s <strong>of</strong> process<br />
s in the extended model <strong>of</strong> Schmid and Zagst, and process u in the model <strong>of</strong><br />
Bakshi, Madan and Zhang, all based on our parameter estimates for BBB1<br />
rated corporate bonds (data used for estimation: October 1, 1993 − June 1,<br />
2001). The mean reversion levels <strong>of</strong> s are appropriately scaled. The horizontal<br />
axis is scaled in years, time 0 is October 1, 1993.<br />
28
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