EconPapers    
Economics at your fingertips  
 

Valuing defaultable bonds: an excursion time approach

Martina Nardon ()

Finance from EconWPA

Abstract: Recently there has been some interest in the credit risk literature in models which involve stopping times related to excursions. The classical Black-Scholes-Merton-Cox approach postulates that default may occur, either at or before maturity, when the firm's value process falls below a critical threshold. In the excursion approach the duration of default, the time period from the financial distress announcement through its resolution, is explicitly modeled. In this contribution, we provide a review of the literature on excursion time models of credit risk. Moreover, we examine the effects on credit spreads structure of different specifications of the event that triggers default.

Keywords: Credit risk; structural models; excursion approach; default threshold; default probability. (search for similar items in EconPapers)
JEL-codes: C15 C63 G12 G13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin, nep-fmk and nep-rmg
Date: 2005-11-28
Note: Type of Document - pdf; pages: 16
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://econwpa.repec.org/eps/fin/papers/0511/0511015.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpfi:0511015

Access Statistics for this paper

More papers in Finance from EconWPA
Series data maintained by EconWPA ().

 
Page updated 2017-03-26
Handle: RePEc:wpa:wuwpfi:0511015