Probability estimate of default

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Reference no: EM131787427

You see the following statement in a popular business periodical:

"The credit-default swap spread on Greece is now 1,340 basis points. This means that there is a 68% probability that within five years Greece will default."

a. How is the "68 percent probability of default" obtained?

b. What assumptions must be made to use this probability estimate of default?

Reference no: EM131787427

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