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Is there any actual "shock" that comes if a default happens in a case like this? My understanding is that the probability would already be priced in to whatever
by version_five 5y ago
Is there any actual "shock" that comes if a default happens in a case like this? My understanding is that the probability would already be priced in to whatever the debt is trading at, so that between t_default-epsilon and t_default+epsilon there should only be some minor adjustment based on how the probability was mis-estimated. Does anything really change at this point if they default?
- orbz 5y agoThere will always be some pressure from people or groups betting against the seemingly inevitable as they can get highs returns if things don’t happen as the crowd predicts.