A comprehensive structural model for defaultable fixed-income bonds


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,

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Research Papers in Economics

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Last time updated on 7/6/2012

This paper was published in Research Papers in Economics.

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