Pricing defaultable debt: some exact results

1998/08/16 by D. F. Wang, Wang, D. F.
Economics, Econometrics and Finance · Physics and Astronomy · #FOS: Economics and business #FOS: Physical sciences #Pricing of Securities (q-fin.PR) #Statistical Mechanics (cond-mat.stat-mech) #cond-mat.stat-mech #q-fin.PR

paper · pdf · doi:10.48550/arxiv.cond-mat/9808168

Revtex, 8 pages

arxiv created 1998/08/16 · arxiv updated 2009/11/30

Abstract

In this letter, I consider the issue of pricing risky debt by following Merton's approach. I generalize Merton's results to the case where the interest rate is modeled by the CIR term structure. Exact closed forms are provided for the risky debt's price.

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