CorporateDefaults.com by Savvysoft has released implied default
probabilities for Bear Stearns for the past several weeks. A chart
shows the default probabilities rising steadily from 4.88% on March 5
to 8.26% on March 13, an increase of more than 65%.
The default probabilities calculated at CorporateDefaults.com are
based on a bond´s spread to the Treasury curve. A corporate bond
trades at a higher yield, and therefore a lower price, than a
Treasury, to compensate for a possible default. The larger the price
discount, the greater the market believes is the chance of default.
These implied default probabilities are an independent, objective and
accurate measure of what the market as a whole thinks is the chance of
a company defaulting.
The Bear Stearns default probability history:
-0-
*T
Default
Date Probability
3/5 4.88%
3/6 5.69%
3/7 6.05%
3/10 6.65%
3/11 7.74%
3/12 7.60%
3/13 8.26%
*T
"Rumors have a way of turning out to be true, and that was
certainly the case here," said Rich Tanenbaum, President of Savvysoft.
"But even if you weren´t clued into the rumor mill, CorporateDefaults
told us that the market was expecting problems at Bear Stearns."
CorporateDefaults tracks the implied default probabilities of
thousands of issuers, and is updated daily.
About Savvysoft
Savvysoft is a New York City-based provider of high-caliber OTC
derivatives analytics, portfolio and risk management systems, and
market-implied corporate default rates. Savvysoft´s analytical
products handle OTC derivatives in many markets including: equities,
interest rates, FX, commodities, convertibles, MBS, electricity,
energy, and credit. Savvysoft products are used by over 3000
institutions in 15 countries worldwide. The institutions include
top-tier banks, dealers, brokers, money managers, energy suppliers,
corporate treasurers, auditors and consultants. Savvysoft was founded
by Rich Tanenbaum, the head of Derivatives Research at Bankers Trust
(now Deutsche Bank). Savvysoft´s corporate headquarters are located at
17 State Street, 4th Floor, New York, NY 10004 U.S.A. Tel: +1
212-742-8677; Fax: +1 212-425-8677; Web: www.savvysoft.com,
www.corporatedefaults.com.