Endogenous Liquidity and Defaultable Bonds

Term Structures of Defaultable Bonds

In this essay we introduce three types of credit pricing models: first and second generation structural-form models and reduced-form models with relative papers and their main results. This paper mainly focuses on the reduced-form credit pricing model by explaining Duffie and Singleton’s paper Modeling Term Structure of Defaultable Bonds (1999). A detailed explanation of the paper’s deductions ...

Defaultable Bonds under Imprecise Information

This paper develops a structural model for defaultable bonds in a fuzzy environment. The numerical results calculated from the closed-form solution show that the fuzziness of the stochastic underlying asset and of bankruptcy costs have material impact on the term structures of credit spreads and on the duration of

Valuation of defaultable bonds and debt restructuring

Stochastic Volatility Effects on Defaultable Bonds

We study the effect of introducing stochastic volatility in the first passage structural approach to default risk. We analyze the impact of volatility time scales on the yield spread curve. In particular we show that the presence of a short time scale in the volatility raises the yield spreads at short maturities. We argue that combining first passage default modeling with multiscale stochastic...

Convertible Bonds in a Defaultable Diffusion Model