A Markov Model for Credit Risk Spreads
碩士 === 東海大學 === 數學系 === 93 === JLT propose a Markov chain model for valuing risky debt that explicitly incorporates a firm's credit rating as an indicator of the likelihood of default. It is important to include credit risk information in the pricing models, since credit derivatives are sensit...
| Main Authors: | , |
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| Other Authors: | |
| Format: | Others |
| Language: | en_US |
| Published: |
2005
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| Online Access: | http://ndltd.ncl.edu.tw/handle/93455386605234661628 |
| Summary: | 碩士 === 東海大學 === 數學系 === 93 === JLT propose a Markov chain model for valuing risky debt
that explicitly incorporates a firm's credit rating as an
indicator of the likelihood of default. It is important to
include credit risk information in the pricing models, since
credit derivatives are sensitive to the firm's credit quality.
But there is a drawback of the JLT model in application to the
real market. This makes the risk premium adjustments ill-defined,
and the risk neutral process does not exist. To avoid this, KK
propose a way to overcome this problem.
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