Sentence examples for cost of default from inspiring English sources
So for an average company with a default probability of 5% over a five-year horizon, the expected cost of default, over that same time period, would be 1% of the firm's enterprise value.
Multiplying this number by the probability of default determined above produces the expected cost of default, or the amount a company would want to insure itself for, if it could.
In turn, the higher cost of default insurance pushes up the bond yields of European debt and makes the plight of weak governments even worse.Are CDSs driving the market?
But if people expect a default – and also if they believe that once a country takes on the fixed cost of default, it might as well impose a big haircut on creditors – then you could see interest costs rising to a point where default indeed becomes the preferred option.
The yield spread between short- and long-term debt has widened to 3.5 percentage points, while the cost of default protection on its sovereign debt has narrowed from 4.8% a year in March to 1.3% now.
The federal government agrees to shoulder the cost of defaults in nearly all of the mortgages made today.
Arriving at the cost of defaulting on debt is a bit more complicated: The probability that the company will not be able to meet its debt obligations is multiplied by the likely impact of that default, should it happen, on the company's value.
Creditors have struck a blow for the sanctity of contracts and raised the costs of default, they argue.
He finds that QE extensions are associated with a drop in the costs of default insurance that protects against a bank or insurer going bust.
Now, a small but growing band of Greek economists, none of them very well known, is beginning to ask the same question: namely, whether the benefit of having a cheap currency under Greek control would outweigh the costs of defaulting on its debt and abandoning the euro.
For example, the Markit iTraxx SovX Western Europe index, which measures the cost of credit default swaps that protect against a European sovereign default, has fallen 12 percent since the end of last week.
