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Natural default probabilities are the actual ones. If we use the observed historical probability of default of 1.5%, the expected value of the random unit flow of the risky debt is:

This future value is above 1.06, that of the risk-free debt. There is no reason to expect that the values will coincide if we use the actual, or natural, default probability. Conversely, taking the equality as a constraint, there is a value of the default probability making them equal.

The discrepancy between the two values, 1.06 and 1.06866, cannot hold if it provides investors with a risk-free arbitrage opportunity. They would buy the risk-free asset and short (sell) the risky one to make a mechanical gain. This would increase the price of the risk-free asset and decrease the value of the risky asset. Hence, both values should be equal if there is no risk in the arbitrage. However, there is risk, and this is why the equality does not hold. The expected value of the risky debt, 1.6866, is not certain. The future flow will be either 0.324 or 1.08 with the natural probabilities 8% and 92%. Equality assumes that investors will be happy with 1.06866 in 1 year, even though this value is uncertain.

Risk aversion implies that the certainty equivalent of this flow should be lower. In this case, it has to be 1.06 under risk-neutrality, because investors would not care about risk. Therefore, the market value of the risky flow should be less than its expected value with natural probabilities. This requires changing probabilities, and increasing the downside probability to bring the expected value in line with 1.06. The risk-neutral default probability is higher than the natural default probability.