Flexing the default barrier

References

• Aunon-Nerin , D , Cossin , D , Hricko , T and Huang , Z . 2002 . Exploring for the determinants of credit risk in credit default swap transaction data: Is fixed-income markets' information sufficient to evaluate credit risk? FAME Research Paper No. 65 ,
   Google Scholar
• Benkert , C . 2004 . Explaining credit default swap premia . J. Fut. Mkts , 24 ( 1 ) : 71 – 92 .
   Web of Science ®Google Scholar
• Berndt, A. Douglas, R., Duffie, D., Ferguson, M. and Schranz, D., Measuring default risk premia from default swap rates and EDFs. Working Paper, Stanford University, 2008.
   Google Scholar
• Black , F and Cox , J . 1976 . Valuing corporate securities: some effects of bond indenture provisions . J. Finance , 31 : 351 – 367 .
   Web of Science ®Google Scholar
• Borovkov , K and Novikov , A . 2005 . Explicit bounds for approximation rates of boundary crossing probabilities for the Wiener process . J. Appl. Probab. , 42 ( 1 ) : 82 – 92 .
   Web of Science ®Google Scholar
• Brigo , D and Masetti , M . 2005 . “ Risk neutral pricing of counterparty risk ” . In Counterparty Credit Risk Modeling: Risk Management, Pricing and Regulation , Edited by: Pykhtin, chap. 10 , M . 285 – 335 . London : Risk Books .
   Google Scholar
• Brigo , D and Mercurio , F . 2006 . Interest Rate Models – Theory and Practice. With Smile, Inflation and Credit, , 2nd , New York : Springer .
   Google Scholar
• Brigo , D and Morini , M . 2006 . Structural credit calibration . Risk Mag. , April : 78 – 83 .
   Google Scholar
• Brigo , D and Tarenghi , M . 2005a . Credit default swap calibration and counterparty risk valuation with a scenario based first passage model. , Working Paper
   Google Scholar
• Brigo , D and Tarenghi , M . 2005b . Credit default swap calibration and equity swap valuation under counterparty risk with a tractable structural model. Working Paper
   Google Scholar
• Briys , E and de Varenne , F . 1997 . Valuing risky fixed rate debt: an extension . J. Financial Quant. Anal. , 32 ( 2 ) : 239 – 248 .
   Web of Science ®Google Scholar
• Collin-Dufresne , P and Goldstein , R . 2001 . Do credit spreads reflect stationary leverage ratios? . J. Finance , 56 ( 5 ) : 1929 – 1957 .
   Web of Science ®Google Scholar
• Cox , D and Miller , H . 1965 . The Theory of Stochastic Processes , London : Chapman & Hall .
   Google Scholar
• Dangl , T and Zechner , J . 2004 . Credit risk and dynamic capital structure choice . J. Financial Intermed. , 13 : 183 – 204 .
   Web of Science ®Google Scholar
• Detemple , J and Tian , W . 2007 . Debt with endogenous safety covenants: Default and corporate securities valuation. Working Paper, Boston University and University of Waterloo
   Google Scholar
• Dorfleitner , G , Schneider , P , Hawlitschek , K and Buch , A . 2008 . Pricing options with Green's functions when volatility, interest rate and barriers depend on time . Quant. Finance , 8 ( 2 ) : 119 – 133 .
   Web of Science ®Google Scholar
• Duffie , D and Singleton , K . 1997 . An econometric model of the term structure of interest rate swap yields . J. Finance , 52 ( 4 ) : 1287 – 1323 .
   Web of Science ®Google Scholar
• Eom , YH . 2004 . Helwege, J. and Huang, J.-Z., Structural models of corporate bond pricing: an empirical analysis . Rev. Financial Stud , 17 ( 2 ) : 499 – 544 .
   Web of Science ®Google Scholar
• Ericsson , J , Jacobs , K and Oviedo , RA . 2007 . The determinants of credit default swap premia . J. Financial Quant. Anal. , forthcoming
   Web of Science ®Google Scholar
• Giesecke , K . 2006 . Default and information . J. Econ. Dynam. Control , 30 ( 11 ) : 2281 – 2303 .
   Web of Science ®Google Scholar
• Giesecke , K and Goldberg , LR . 2004 . Forecasting default in the face of uncertainty . J. Deriv. , 12 ( 1 ) : 11 – 25 .
   Google Scholar
• Hawlitschek , K . 1989 . Approximation Greenscher Funktionen bei parabolischen Differenzialgleichungen . J. Appl. Math. Phys. (ZAMP) , 40 : 912 – 919 .
   Google Scholar
• Hilberink , B and Rogers , L . 2002 . Optimal capital structure and endogenous default . Finance Stochast. , 6 ( 2 ) : 237 – 263 .
   Web of Science ®Google Scholar
• Hsu, J.C., Saá-Requejo, J. and Santa-Clara, P., Bond pricing with default risk. Working Paper, Anderson School, UCLA, 2003.
   Google Scholar
• Hui , C-H , Lo , C-F and Tsang , S-W . 2003 . Pricing corporate bonds with dynamic default barriers . J. Risk , 5 ( 3 ) : 17 – 37 .
   Google Scholar
• Kahalé , N . 2008 . Analytic crossing probabilities for certain barriers by Brownian motion . Ann. Appl. Probab. , 18 ( 4 ) : 1424 – 1440 .
   Web of Science ®Google Scholar
• Kim, I., Ramaswamy, K. and Sundaresan, S., The valuation of corporate fixed income securities. Working Paper, Wharton School, University of Pennsylvania, 1993.
   Google Scholar
• Lando , D . 2004 . Credit Risk Modeling: Theory and Applications , Princeton : Princeton University Press .
   Google Scholar
• Lo , C-F , Lee , HC and Hui , C-H . 2003 . A simple approach for pricing barrier options with time-dependent parameters . Quant. Finance , 3 ( 2 ) : 98 – 107 .
   Web of Science ®Google Scholar
• Longstaff , FA and Schwartz , E . 1995 . A simple approach to valuing risky fixed and floating rate debt . J. Finance , 50 ( 3 ) : 789 – 819 .
   Web of Science ®Google Scholar
• Merton , R . 1974 . On the pricing of corporate debt: the risk structure of interest rates . J. Finance , 29 : 449 – 470 .
   Web of Science ®Google Scholar
• Nelson , CR and Siegel , AF . 1987 . Parsimonious modeling of yield curves . J. Business , 60 ( 4 ) : 473 – 489 .
   Web of Science ®Google Scholar
• Novikov , A , Frishling , V and Kordzakhia , N . 1999 . Approximations of boundary crossing probabilities for a Brownian motion . J. Appl. Probab. , 36 ( 4 ) : 1019 – 1030 .
   Web of Science ®Google Scholar
• Pykhtin , M . 2005 . Counterparty Credit Risk Modeling: Risk Management, Pricing and Regulation , London : Risk Books .
   Google Scholar
• Pötzelberger, K., Estimating boundary crossing probabilities for diffusion processes by adaptive control variables. Working Paper, Vienna University of Economics and Business, 2008.
   Google Scholar
• Rapisarda, F., Pricing barriers on underlyings with time-dependent parameters. Working Paper, 2003.
   Google Scholar
• Ricciardi , LM , Sacerdote , L and Sato , S . 1984 . On an integral equation for first-passage-time probability densities . J. Appl. Probab. , 21 ( 2 ) : 302 – 314 .
   Web of Science ®Google Scholar
• Sacerdote , L and Tomassetti , F . 1996 . On evaluations and asymptotic approximations of first-passage-time probabilities . Adv. Appl. Probab. , 28 ( 1 ) : 270 – 284 .
   Web of Science ®Google Scholar
• Schmidt , T and Novikov , A . 2008 . A structural model with unobserved default boundary . Appl. Math. Finance , 15 ( 2 ) : 183 – 203 .
   Google Scholar
• Schneider , P , Sögner , L and Veža , T . 2009 . The economic role of jumps and recovery rates in the market for corporate default risk . J. Financial Quant. Anal. , forthcoming
   Web of Science ®Google Scholar
• Vazza, D., Aurora, D., Kraemer, N., Kesh, S. and Torres, J., Annual 2006 global corporate default study and ratings transitions. Technical report, Standard and Poor's, Global Fixed Income Research, New York, 2007.
   Google Scholar
• Walter , W . 1964 . Differential- und Integral-Ungleichungen , Berlin : Springer .
   Google Scholar
• Wang , L and Pötzelberger , K . 1997 . Boundary crossing probability for Brownian motion and general boundaries . J. Appl. Probab. , 34 ( 1 ) : 54 – 65 .
   Web of Science ®Google Scholar
• Wang , L and Pötzelberger , K . 2001 . Boundary crossing probability for Brownian motion . J. Appl. Probab. , 38 ( 1 ) : 152 – 164 .
   Web of Science ®Google Scholar
• Wang , L and Pötzelberger , K . 2007 . Crossing probabilities for diffusion processes with piecewise continuous boundaries . Methodol. Comput. Appl. Probab. , 9 ( 1 ) : 21 – 40 .
   Web of Science ®Google Scholar