A structural model with unobserved default boundary

Schmidt, T; Novikov, A

A structural model with unobserved default boundary

Schmidt, T Novikov, A

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Publication Type:: Journal Article
Citation:: Applied Mathematical Finance, 2008, 15 (2), pp. 183 - 203
Issue Date:: 2008-04-01

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Field	Value	Language
dc.contributor.author	Schmidt, T	en_US
dc.contributor.author	Novikov, A https://orcid.org/0000-0001-8529-173X	en_US
dc.date.issued	2008-04-01	en_US
dc.identifier.citation	Applied Mathematical Finance, 2008, 15 (2), pp. 183 - 203	en_US
dc.identifier.issn	1350-486X	en_US
dc.identifier.uri	http://hdl.handle.net/10453/12536
dc.description.abstract	A firm-value model similar to the one proposed by Black and Cox (1976) is considered. Instead of assuming a constant and known default boundary, the default boundary is an unobserved stochastic process. This process has a Brownian component, reflecting the influence of uncertain effects on the precise timing of the default, and a jump component, which relates to abrupt changes in the policy of the company, exogenous events or changes in the debt structure. Interestingly, this setup admits a default intensity, so the reduced form methodology can be applied.	en_US
dc.relation.ispartof	Applied Mathematical Finance	en_US
dc.relation.isbasedon	10.1080/13504860701718281	en_US
dc.subject.classification	Finance	en_US
dc.title	A structural model with unobserved default boundary	en_US
dc.type	Journal Article
utslib.citation.volume	2	en_US
utslib.citation.volume	15	en_US
utslib.for	010205 Financial Mathematics	en_US
utslib.for	0102 Applied Mathematics	en_US
utslib.for	0103 Numerical and Computational Mathematics	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Science
pubs.organisational-group	/University of Technology Sydney/Faculty of Science/School of Mathematical and Physical Sciences
pubs.organisational-group	/University of Technology Sydney/Strength - QFRC - Quantitative Finance Research Centre
utslib.copyright.status	closed_access
pubs.issue	2	en_US
pubs.publication-status	Published	en_US
pubs.volume	15	en_US

Abstract:

A firm-value model similar to the one proposed by Black and Cox (1976) is considered. Instead of assuming a constant and known default boundary, the default boundary is an unobserved stochastic process. This process has a Brownian component, reflecting the influence of uncertain effects on the precise timing of the default, and a jump component, which relates to abrupt changes in the policy of the company, exogenous events or changes in the debt structure. Interestingly, this setup admits a default intensity, so the reduced form methodology can be applied.

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http://hdl.handle.net/10453/12536