• 1 Introduction
  • 2 Model Setup
  • 3 Pricing of Capital Structure Derivatives
  • 3.1 Pricing Equity and Corporate Debt
  • 3.2 Pricing Stock Options
  • 3.3 Pricing Credit Derivatives
  • 4 Model Analysis
  • 4.1 Asset Returns and CDS Spreads
  • 4.2 Term Structure of Corporate Bond Spreads
  • 4.3 Stock Prices and Firm Value Skewness
  • 4.4 Co-movement of Equity Prices, Credit Spreads andStock Return Volatility
  • 4.5 Option-Implied Volatility Smiles
  • 4.6 Joint Default Probabilities
  • 4.7 The Three-Asset Basket
  • 5 Conclusion
  • 6 Appendix A: Conditional Laplace transformof the asset return process
  • 7 Appendix B: Proofs of Propositions
  • 8 Appendix C: Additional Material
  • 8.1 The Gaussian Model for multi-issuer credit derivatives
  • 8.2 Computation of base correlation for the three-assetbasket
  • References