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Pricing Defaultable Debt: Some Exact Results

Author

Listed:
  • D. F. WANG

    (Department of Statistics and Actuarial Science, University of Waterloo, Waterloo, ONT N2L 3E5 Canada and Toronto Dominion Bank, Canada)

Abstract

In this letter, I consider the issue of pricing risky debt by following Merton's approach. I generalize Merton's results to the case where the interest rate is modeled by the CIR term structure. Exact closed forms are provided for the risky debt's price.

Suggested Citation

  • D. F. Wang, 1999. "Pricing Defaultable Debt: Some Exact Results," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 2(01), pages 95-99.
    • Handle: RePEc:wsi:ijtafx:v:02:y:1999:i:01:n:s0219024999000078
    DOI: 10.1142/S0219024999000078
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