The behavior of the hazard rate in the Gaussian structural default model under asymmetric information

Peter Spencer

Discussion Papers from Department of Economics, University of York

Abstract: This paper shows that the standard and deferred filtration structural models of corporate default are isomorphic, allowing the insights of the standard full information setting to be carried over to the more complex case of asymmetric information. It shows that the accounting lag, which provides a general indicator of uncertainty and opacity in the deferred filtration model, plays a role analogous to that of forward maturity in the standard model. The comparative static properties of the standard model carry over mutatis mutandis and can also be used to sign the effect of signals upon the effective accounting lag and drift parameters.

Keywords: Corporate bond pricing; Incomplete information; Deferred filtration; Default intensity; Comparative statics (search for similar items in EconPapers)
JEL-codes: G12 G13 G33 (search for similar items in EconPapers)
Date: 2013-08
New Economics Papers: this item is included in nep-cta
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