Modeling Term Structures of Defaultable Bonds

@inproceedings{Duffie1999ModelingTS,
  title={Modeling Term Structures of Defaultable Bonds},
  author={Darrell Duffie and Kenneth J. Singleton},
  year={1999}
}
This article presents a new approach to modeling term structures of bonds and other contingent claims that are subject to default risk. As in previous “reduced-form” models, we treat default as an unpredictable event governed by a hazard-rate process. 1 Our approach is distinguished by the parameterization of losses at default in terms of the fractional reduction in market value that occurs at default. Specifically, we fix some contingent claim that, in the event of no default, paysX at timeT… CONTINUE READING
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