Advanced Search
MyIDEAS: Login

A Model to Price Puttable Corporate Bonds with Default Risk

Contents:

Author Info

  • David Wang

    (Hsuan Chuang University)

Registered author(s):

    Abstract

    This paper presents a model for pricing puttable corporate bonds that are subject to default risk. The model incorporates three essential ingredients in the pricing of defaultable puttable bonds: stochastic interest rate, default risk, and put provision. The stochastic interest rate is modeled as a square-root diffusion process. The default risk is modeled as a constant spread, with the magnitude of this spread impacting the probability of a Poisson process governing the arrival of the default event. The put provision is modeled as a constraint on the value of the bond in the finite difference scheme. This paper can be used both as a benchmark for models for pricing puttable corporate bonds that are subject to default risk and as a direction for future research.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://128.118.178.162/eps/fin/papers/0506/0506014.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by EconWPA in its series Finance with number 0506014.

    as in new window
    Length: 10 pages
    Date of creation: 22 Jun 2005
    Date of revision:
    Handle: RePEc:wpa:wuwpfi:0506014

    Note: Type of Document - pdf; pages: 10
    Contact details of provider:
    Web page: http://128.118.178.162

    Related research

    Keywords: Default Risk; Puttable Bond;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is featured on the following reading lists or Wikipedia pages:
    1. Puttable bond in Wikipedia (English)

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpfi:0506014. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.