Direct Estimating Price of a Defaultable Zero-Coupon Bond Using Conception of Continuous Coupon Bond

In this paper, using a conception of continuous coupon bond with continuous accrual of coupons on simple fixed rate for pricing a risky zero-coupon bond is considered. It is shown that only employing this conception allows obtaining explicit equation for price of risky zero-coupon bond from fixed coupon bond prices without any assumption about default process and providing continuous monitoring default events despite periodicity of bond cash flows that improves estimation of credit risk. To apply the conception, it is proposed a simple condition for inversion of discrete bond into continuous coupon one. It is shown that this inversion is possible only for the following recovery assumption: a recovery rate is a part of the present value of remaining cash flows that will not be paid due to default but not for the fractional recovery of par assumption. Examples of calculating the implied survival probabilities and the credit spreads for Ukrainian Eurobonds are given