Generalizing Merton's approach of pricing risky debt: some closed-form results

D.f Wang

Physica A: Statistical Mechanics and its Applications, 1999, vol. 265, issue 1, 292-296

Abstract: In this work, I generalize Merton's approach of pricing risky debt to the case where the interest rate risk is modeled by the CIR term structure. Closed-form result for pricing the debt is given for the case where the firm value has non-zero correlation with the interest rate. This extends previous closed-form pricing formular of zero-correlation case to the generic one of non-zero correlation between the firm value and the interest rate.

Keywords: Defaultable bond; CIR term structure (search for similar items in EconPapers)
Date: 1999
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378437198005457
Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000

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: https://EconPapers.repec.org/RePEc:eee:phsmap:v:265:y:1999:i:1:p:292-296

DOI: 10.1016/S0378-4371(98)00545-7

Access Statistics for this article

Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

More articles in Physica A: Statistical Mechanics and its Applications from Elsevier
Bibliographic data for series maintained by Catherine Liu ().