In my personal opnion, The risk-probability of default of one issuer can be embebed in the delta of those equity out the money, where the strike can be the price where Market Capitalisation of this company are > or = to the total Debt, with some special points.
In this way, I have the same question or doubt of you, for that reason any expirance in this way are points that I am thinking about.
Can you make arbitrage beteween Buy Bonds in asset o sell protection and Buy Putīs out the money of the issuer???? Would be similar as manage a book of volatility?????
Regards
Alberto Madrid
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