Purpose – To propose a new methodology to infer the risk‐neutral default probability curve of a generic firm XYZ from equity options prices. Design/methodology/approach – It is assumed that the market is arbitrage‐free and the “market” probability measure implied in the equity...

Purpose – To implement the model described in the companion paper, “Pricing credit risk through equity options calibration, part 1 – theory,” and show how to calculate the price of a set of coupon bonds issued by a US telecommunications and media company, AOL Time Warner, based on the...

Purpose –With the development of the modern portfolio theory and the advancement of information technology, the employment of quantitative approaches to practically measure asset risks and returns, and the construction of portfolios (even dynamic portfolios) has become possible and popular....

Purpose – To propose a new methodology to infer the risk-neutral default probability curve of a generic firm XYZ from equity options prices. Design/methodology/approach – It is assumed that the market is arbitrage-free and the “market” probability measure implied in the equity options...

Purpose – To implement the model described in the companion paper, “Pricing credit risk through equity options calibration, part 1 – theory,” and show how to calculate the price of a set of coupon bonds issued by a US telecommunications and media company, AOL Time Warner, based on the...

Purpose – With the development of the modern portfolio theory and the advancement of information technology, the employment of quantitative approaches to practically measure asset risks and returns, and the construction of portfolios (even dynamic portfolios) has become possible and popular....