Essays on Credit Risk
Date Issued
2005
Date
2005
Author(s)
Liu, Jen-Chang
DOI
en-US
Abstract
The usefulness of the forward martingale measure has been demonstrated by Jamshidian (1989) in deriving a pricing formula for default-free bond options. By making use of this technique, this paper offers a greatly simplified approach to the valuation of defaultable bonds by revisiting two pioneering hybrid models published in the Journal of Fixed Income. First, Cathcart and El-Jahel's (1998) original numerical inversion of Laplace
transformations for pricing defaultable bonds is replaced with a closed-form formula derived through the use of the forward martingale measure. Second, Schmid and
Zagst's (2000) original four ordinary differential equations for pricing defaultable bonds are replaced by three ordinary differential equations via the use of the forward martingale measure again.
Subjects
破產風險
脆弱選擇權
結構模型
債權順位
遠期平賭測度
seniority status
default risk
forward martingale measure
structural model
vulnerable options
Type
thesis
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