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A comprehensive structural model for defaultable fixed-income bonds

By Rossella Agliardi

Abstract

An exact valuation formula for defaultable corporate coupon bonds is proved. The model incorporates discrete coupons, bankruptcy costs, taxes and the market risk generated by a stochastic risk-free structure. The aim of this paper is twofold: first, we generalise previous pricing models for corporate bonds; second, we provide a comprehensive formula in order to properly disentangle the contribution of several risk factors to credit spreads.Asset pricing, Coupon bonds, Credit risk, Debt valuation, Default risk, Structural models,

DOI identifier: 10.1080/14697680903222451
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