Economics, Econometrics and Finance
8 years ago

New model revolutionizes corporate bond valuation and credit spread analysis!

Abstract and Applied Analysis
The Analysis of Corporate Bond Valuation under an Infinite Dimensional Compound Poisson Framework
Sheng Fan

Paper Summary

The article explores how to value corporate bonds and determine credit spreads using a model that considers both pure and callable defaults. By treating interest rates and firm value as a type of mathematical process, the researchers were able to analyze American options embedded in bonds and calculate bond values more accurately.

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