A Merton-Like Approach to Pricing Debt based on a non-Gaussian Asset Model


This paper is a contribution to the Proceedings of the Workshop Complexity, Metastability and Nonextensivity held in Erice 20-26 July 2004, to be published by World Scientific. We propose a generalization to Merton’s model for evaluating credit spreads. In his original work, a company’s assets were assumed to follow a log-normal process. We introduce fat… (More)


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