Risk Disaggregation and Credit Risk Valuation in a Merton Framework

An investor in a corporate obligation is exposed to the default risk of the obligor. In this article, the author adapts the dynamic valuation framework to disaggregate systematic and idiosyncratic default risk of credit instruments. By articulating the distinction between diversifiable and undiversifiable risk, the article develops a two‐factor model for pricing default risk.

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Year of publication:	2003
Authors:	GATFAOUI, HAYETTE
Published in:	The Journal of Risk Finance. - MCB UP Ltd, ISSN 2331-2947, ZDB-ID 2048922-5. - Vol. 4.2003, 3, p. 27-42
Publisher:	MCB UP Ltd

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Type of publication:	Article
Type of publication (narrower categories):	review-article
Language:	English
Other identifiers:	10.1108/eb022964 [DOI]
Source:	Other ZBW resources

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