Interactions Between Market and Credit Risk: Modeling the Joint Dynamics of Default-Free and Defaultable Bond Term Structures

Roger Walder
Additional contact information
Roger Walder: University of Lausanne, FAME and Banque Cantonale Vaudoise

FAME Research Paper Series from International Center for Financial Asset Management and Engineering

Abstract: The objective of this paper is to model and estimate simultaneously the joint dynamics of default-free and defaultable bond term structures. Defaultable bond prices are modeled in an intensity based framework along the lines of Duffie and Singleton (1999) with state variables following an affine diffusion. Our special interest lies in the benefits of introducing various kinds of interdependencies in the drifts and the diffusions of the factors driving the term structure dynamics. We obtain consistent and efficient estimates of the model parameters using the efficient method of moments (EMM) of Gallant and Tauchen (1996).

Keywords: Term Structure Model; Credit Risk; Defaultable Bond; Effient Method of Moments (search for similar items in EconPapers)
JEL-codes: C5 G13 (search for similar items in EconPapers)
Date: 2002-11
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.swissfinanceinstitute.ch/rp56.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.swissfinanceinstitute.ch/rp56.pdf [301 Moved Permanently]--> https://www.sfi.ch/rp56.pdf [302 Found]--> https://www.sfi.ch/en/rp56.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: https://EconPapers.repec.org/RePEc:fam:rpseri:rp56

Access Statistics for this paper

More papers in FAME Research Paper Series from International Center for Financial Asset Management and Engineering Contact information at EDIRC.
Bibliographic data for series maintained by Ridima Mittal ().