Pricing defaultable debt: some exact results

Details Pricing defaultable debt: some exact results Pricing defaultable debt: some exact results

1998-08-16

arxiv.org/abs/cond-mat/9808168v1

Physics

Condensed Matter

Statistical Mechanics

Revtex, 8 pages

Scientific paper

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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