Benchmark Pricing of Credit Derivatives Under a Standard Market Model
This paper makes use of an integrated benchmark modelling framework that allows us to model credit risk. We demonstrate how to price contingent claims by taking expectations under the real world probability measure in a benchmarked world. Furthermore, put and call options on an index are studied that measure the credit worthiness of a firm.
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- Merton, Robert C., 1977. "On the pricing of contingent claims and the Modigliani-Miller theorem," Journal of Financial Economics, Elsevier, vol. 5(2), pages 241-249, November.
- Robert A. Jarrow & David Lando & Stuart M. Turnbull, 2008.
"A Markov Model for the Term Structure of Credit Risk Spreads,"
World Scientific Book Chapters,
in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 18, pages 411-453
World Scientific Publishing Co. Pte. Ltd..
- Jarrow, Robert A & Lando, David & Turnbull, Stuart M, 1997. "A Markov Model for the Term Structure of Credit Risk Spreads," Review of Financial Studies, Society for Financial Studies, vol. 10(2), pages 481-523.
- Merton, Robert C, 1974. "On the Pricing of Corporate Debt: The Risk Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 29(2), pages 449-470, May.
- Merton, Robert C., 1973. "On the pricing of corporate debt: the risk structure of interest rates," Working papers 684-73., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
- Lara Cathcart & Lina El-Jahel, 2006. "Pricing defaultable bonds: a middle-way approach between structural and reduced-form models," Quantitative Finance, Taylor & Francis Journals, vol. 6(3), pages 243-253. Full references (including those not matched with items on IDEAS)
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