APPENDIX TO CHAPTER 14Corporate Debt and Credit Default Swaps
A14.1 CUMULATIVE DEFAULT AND SURVIVAL RATES
Proposition: If the hazard rate is constant at 
, then the cumulative survival probability to time 
, 
, is 
, and the cumulative default probability, 
, is 
.
Proof: The probability of no default to time 
, 
, is the probability that there is no default to time 
and no default from then to time 
. Mathematically,
(A14.1)
Taking the limit of the right‐hand side of (A14.2) as approaches zero ...
Get Fixed Income Securities, 4th Edition now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
