Credit Risk, Liquidity, and Bubbles

Robert Jarrow () and Philip Protter

International Review of Finance, 2020, vol. 20, issue 3, 737-746

Abstract: This paper presents an arbitrage‐free valuation model for a credit risky security where credit risk coexists and interacts with an asset price bubble and liquidity risk (or liquidity costs). As an illustration, this model is applied to determine the fair rate for microfinance loans.

Date: 2020
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