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Article dans une revue Finance Research Letters Année : 2003

A closed form solution for pricing defaultable bonds

Résumé

Cathcart and El-Jahel [Journal of Fixed Income 8 (1998)] have formalized the "signaling approach" for modeling the default risk of some risky bonds. Their pricing formula requires a numerical method to invert the Laplace transform of the default probability. This letter rather provides a closed form formula based on standard results of the theory of exotic barrier options. One verifies that the original numerical method implemented by Cathcart and El-Jahel [Journal of Fixed Income 8 (1998)] does not lead to significant computational errors.
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Dates et versions

halshs-00010144, version 1 (11-04-2006)

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  • HAL Id : halshs-00010144 , version 1

Citer

Franck Moraux. A closed form solution for pricing defaultable bonds. Finance Research Letters, 2003, 1 (2), pp.135-142. ⟨halshs-00010144⟩
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