Oxelheim, Lars (contributor); Wihlborg, Clas (contributor) - 2008
-risky bond in terms of the pay-offs on a risk-free
bond and a put option on the value of the firm’s assets. The borrower holds a … value, the time to maturity of the bond, and the yield on a default-
free bond with the same time to maturity. The … difference in yield between the default-
risky and the default-free bond is the credit spread. This spread is a put option …