The Optimal Analysis of Default Probability for a Credit Risk Model

Aiyin Wang, Ls Yong, Weili Zeng and Yang Wang

Abstract and Applied Analysis, 2014, vol. 2014, 1-9

Abstract:

A credit risk mathematical model is investigated. Under regular conditions, a different recovery scheme is proposed, which is an extension of the recovery of treasury value scheme with time-continuous liquidation. Assuming that a function depends on the optimal time for the liquidation and the recovery rate, we obtain the functional expression of the risky bond price. When the firm value follows a jump-diffusion process with a Log-exponentially distributed jump, we develop a method to obtain the optimal default probability with time-continuous liquidation.

Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:hin:jnlaaa:878306

DOI: 10.1155/2014/878306

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