Applying default probabilities in an exponential barrier structural model

Arianna Agosto and Enrico Moretto

Economics and Quantitative Methods from Department of Economics, University of Insubria

Abstract: This paper shows that the use of a time-dependant barrier in a structural model improve its flexibility because it allows to incorporate, as input, the probability of default. The main result achieved is the assessment that the default barrier is, indeed,characterized by a non flat structure. JEL Classification: G13, G33

Keywords: default structural models; barrier options with exponential boundaries; implied default probability (search for similar items in EconPapers)
Pages: 15 pages
Date: 2010-06
New Economics Papers: this item is included in nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:ins:quaeco:qf1005

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