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Pricing of Defaultable Bonds with Log-Normal Spread: Development of the Model and an Application to Argentinean and Brazilian Bonds During the Argentine Crisis.
- Source :
- Review of Derivatives Research; 2005, Vol. 8 Issue 1, p49-60, 12p
- Publication Year :
- 2005
-
Abstract
- In this paper we describe a two-factor model for a defaultable discount bond, assuming log-normal dynamics with bounded volatility for the instantaneous short rate spread. Under some simplified hypothesis, we obtain an explicit barrier-type solution for zero recovery and constant recovery. We also present a numerical application for Argentinean and Brazilian Sovereign Bonds during the default crisis of Argentina. [ABSTRACT FROM AUTHOR]
- Subjects :
- BOND prices
FINANCIAL crises
GOVERNMENT securities
MARKET volatility
Subjects
Details
- Language :
- English
- ISSN :
- 13806645
- Volume :
- 8
- Issue :
- 1
- Database :
- Complementary Index
- Journal :
- Review of Derivatives Research
- Publication Type :
- Academic Journal
- Accession number :
- 17414049
- Full Text :
- https://doi.org/10.1007/s11147-005-1007-8