Chiarella, Carl; Fanelli, Viviana; Musti, Silvana - 2008
interest rates
is flat and deterministic; ii) the probability distribution of the firm’s assets is lognormal;
iii) the firm … option pricing theory is used for risky debt pricing
(Black and Scholes (1973)). The structure of risky interest rates ….
The HJM approach is used by Schönbucher (1998) in order to model the term structure
of defaultable interest rates. The …