Merton Model is one of the famous credit risk models. This model presumes that the only source of uncertainty in equity prices is the firm’s net asset value .But the above market condition holds only when the market is efficient which is often been ignored in modern research. Another, the original Merton Model is based on assumptions that in the event of default absolute priority holds, renegot...

2 The Merton model, which is used for modeling default probabilities, is based on the assumption that the equity value is an option on the asset of a company with the strike price equal to the company debts. In the Merton model, it is implicitly assumed that debts last for a fixed period of time, and determining the default point that is the strike price of the option has been controversial in ...

We study zero-sum optimal stopping games associated with perpetual convertible bonds in an extension of the Black-Merton-Scholes model random dividends under various information flows. In this...

We study Lévy processes associated with the power-variance family of probability laws. Their path and structural properties as well as the exact asymptotics of the probabilities of large deviations are established. We use the techniques of DoleanMeyer exponentials to introduce an additional class of Lévy processes. The ordinary exponentials of its members constitute the geometric Lévy processes...