Corporate bond pricing model with stochastically volatile firm value process

Woon Wook Jang, Young Ho Eom and Yong Joo Kang

Economics Letters, 2016, vol. 148, issue C, 41-44

Abstract: We propose a new structural model for corporate bond pricing that assumes stochastically volatile firm value process with before-maturity default possibility. We demonstrate the model’s potential using a simulation study and provide a semi-analytic solution method for the bond prices.

Keywords: Structural corporate bond pricing; Stochastic volatility; Fortet equation (search for similar items in EconPapers)
JEL-codes: G10 G12 G13 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:148:y:2016:i:c:p:41-44

DOI: 10.1016/j.econlet.2016.09.018

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