IDEAS home Printed from
   My bibliography  Save this article

Valuation Of Defaultable Claims – A Survey


  • Marliese Uhrig-Homburg


The literature on default-claim pricing falls into three categories. Building on the classical Merton model, the structural approach models the dynamics of the asset value and assumes that default is triggered when the equity value reaches an exogenous asset level. In a second class of structural models, the firm itself derives a default boundary endogenously. Finally, in the reduced-form approach default occurs according to an exogenous hazard rate process. In this paper I survey the default-claim literature. I provide a general valuation framework for default-claim pricing. I then give an example designed to clarify the main difference between the structural and the reduced-form approach. For each model category I show how current pricing models fit into my general framework, describe the applicable papers in some detail, and discuss related extensions.

Suggested Citation

  • Marliese Uhrig-Homburg, 2002. "Valuation Of Defaultable Claims – A Survey," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 54(1), pages 24-57, January.
  • Handle: RePEc:sbr:abstra:v:54:y:2002:i:1:p:24-57

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Bruno S. Frey, 2007. "Evaluierungen, Evaluierungen H Evaluitis," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 8(3), pages 207-220, August.
    2. Sönke Albers, 2009. "Misleading Rankings of Research in Business," German Economic Review, Verein für Socialpolitik, vol. 10, pages 352-363, August.
    3. Bruno S. Frey & Katja Rost, 2010. "Do rankings reflect research quality?," Journal of Applied Economics, Universidad del CEMA, vol. 13, pages 1-38, May.
    4. Dilger, Alexander, 2009. "Rankings von Zeitschriften und Personen in der BWL," IÖB-Diskussionspapiere 5/09, University of Münster, Institute for Economic Education.
    5. Magnus Henrekson & Daniel Waldenström, 2011. "How Should Research Performance Be Measured? A Study Of Swedish Economists," Manchester School, University of Manchester, vol. 79(6), pages 1139-1156, December.
    6. Bernard Raffournier & Alain Schatt, 2010. "Is European Accounting Research Fairly Reflected in Academic Journals? An Investigation of Possible Non-mainstream and Language Barrier Biases," European Accounting Review, Taylor & Francis Journals, vol. 19(1), pages 161-190.
    7. repec:spr:scient:v:74:y:2008:i:2:d:10.1007_s11192-008-0217-x is not listed on IDEAS
    8. Matthias Krapf, 2010. "Research evaluation and journal quality weights: Much ado about nothing?," Working Paper Series of the Department of Economics, University of Konstanz 2010-02, Department of Economics, University of Konstanz.
    9. Daniel B. Klein & Eric Chiang, 2004. "The Social Science Citation Index: A Black Box—with an Ideological Bias?," Econ Journal Watch, Econ Journal Watch, vol. 1(1), pages 134-165, April.
    10. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
    11. Werner Reinartz, 2011. "Discussion of “Quantitative and Qualitative Rankings of Scholars”: Feeling Good or Feeling Right?," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 63(1), pages 109-114, January.
    12. Bruno S. Frey & Margit Osterloh, 2006. "Evaluations: Hidden Costs, Questionable Benefits, and Superior Alternatives," IEW - Working Papers 302, Institute for Empirical Research in Economics - University of Zurich.
    13. Uschi Backes-Gellner, 2011. "Discussion of “Quantitative and Qualitative Rankings of Scholars”: Rankings upon Rankings – and no End in Sight –," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 63(1), pages 99-108, January.
    14. Robert Hofmeister & Heinrich W. Ursprung, 2008. "Das Handelsblatt Ökonomen-Ranking 2007: Eine kritische Beurteilung," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 9(3), pages 254-266, August.
    15. Katja Rost & Bruno S. Frey, 2011. "Quantitative and Qualitative Rankings of Scholars," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 63(1), pages 63-91, January.
    16. Soenke Albers, 2011. "Discussion of “Quantitative and Qualitative Rankings of Scholars”: Esteem Indicators: Membership in Editorial Boards or Honorary Doctorates," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 63(1), pages 92-98, January.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Albrecht, Peter, 2005. "Kreditrisiken - Modellierung und Management: Ein Überblick," German Risk and Insurance Review (GRIR), University of Cologne, Department of Risk Management and Insurance, vol. 1(2), pages 22-152.
    2. Yalin Gündüz & Marliese Uhrig-Homburg, 2014. "Does modeling framework matter? A comparative study of structural and reduced-form models," Review of Derivatives Research, Springer, vol. 17(1), pages 39-78, April.
    3. Winsen, Joseph K., 2010. "An overview of project finance binomial loan valuation," Review of Financial Economics, Elsevier, vol. 19(2), pages 84-89, April.
    4. Scheicher, Martin & Raunig, Burkhard, 2008. "A value at risk analysis of cedit default swaps," Working Paper Series 968, European Central Bank.
    5. Sabiwalsky, Ralf, 2010. "Nonlinear modelling of target leverage with latent determinant variables -- new evidence on the trade-off theory," Review of Financial Economics, Elsevier, vol. 19(4), pages 137-150, October.
    6. Maclachlan, Iain C, 2007. "An empirical study of corporate bond pricing with unobserved capital structure dynamics," MPRA Paper 28416, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sbr:abstra:v:54:y:2002:i:1:p:24-57. 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: (sbr). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.